US stock index futures were firmer this morning, indicating a return of investor risk appetite. The positive start was helped by a more conciliatory tone from President Trump concerning existing tariffs, and those threatened in the future.
The latter include the reciprocal tariffs threatened by the US which are due to come into effect at the beginning of next month. It also appears that reciprocal tariffs are unlikely to be as ‘random’ and ‘scattergun’ as they first appeared. Mr Trump has said that he plans to talk to Chinese President Xi Jinping this week on trade issues.
Markets have steadied somewhat following a near month-long sell-off which saw both the S&P 500 and NASDAQ drop into correction territory (defined as a fall of 10% or more from a recent high).
Source: TN Trader
Last week the Federal Reserve left the Fed Funds rate unchanged, as expected. But investors were relieved that the Fed still expects to cut rates by 50 basis points this year, leaving their December forecast unchanged.
This comes despite Fed members downgrading their 2025 growth forecasts, while raising their expectations for inflation. The central bank also announced that it would be slowing down its balance sheet run-off.
Starting in April, the Fed will sell $5 billion per month of Treasuries, down from $25 billion currently. This will take some pressure off the bond market, although the real benefit is the message it sends to market participants.
Overall, the Fed was perceived as being more dovish than expected. This helped equities to rebound off recent lows, and put an end to a four-week losing streak. Tariff updates are potentially a big market-mover this week.
In addition there are corporate results from KB Homes, Okla, GameStop, Dollar Tree, Chewy, Jeffries and Lululemon. The market is also anticipating an IPO from Nvidia-backed Coreweave. The listing is expected to raise $2.7billion, valuing the company at $26 billion. The week rounds off with an update to the Fed’s preferred inflation measure, Core PCE.
