Defence stocks weigh on markets

US stock indices pushed higher for a third consecutive session on Tuesday, continuing their New Year's rally. Investors ignored geopolitical noise and lingering macro uncertainty, choosing instead to increase their exposure to US equities as the world’s biggest and most dynamic economy continues to drive global growth.

The Dow Jones Industrial Average jumped 1% to close above 49,000 for the first time ever. The S&P 500 also notched up a new all-time closing high, while the NASDAQ and Russell 2000 added 0.7% and 1.4%, respectively.

Source: TN Trader

The moves underline the market’s risk appetite and demonstrate the broadening in exposure to encompass overlooked value plays and small caps, as well as tech. Further evidence of widening exposure came from the S&P 500, where nine of its eleven sectors closed higher, led by Health Care and Technology.

Nvidia, the world’s biggest company by market capitalisation, shows signs of steadying a torrid fourth quarter last year. The stock hit an all-time high above $212 at the end of October and then dropped 20% over the following month, breaking below $170. It appears to have found its footing since mid-December, rallying 10% from its lows.

But it has stalled out somewhat, and it looks as if investors currently prefer to deploy funds to stocks with cheaper valuations for now. This is despite CEO Jensen Huang dominating the 2026 CES show in Las Vegas. He started by emphasising the importance of robotics to the company, stating that Nvidia was talking to robotaxi developers and manufacturers about using Nvidia’s chips and Drive AV software.

He also announced that production on its new Vera Rubin supercomputer had begun. Later, he said the company is seeing very strong Chinese demand for its H200 AI chips, adding that production has restarted and export license details are being finalised with the US government. Despite this, Nvidia’s stock price has traded sideways since the end of last year.

US stock index futures were a touch weaker in early trade this morning. This suggests a touch of profit-taking given the rally since the New Year, and ahead of some key labour market updates. Today sees the release of ADP Payrolls and JOLTS Job Openings, along with the ISM Services PMI.

Weekly Unemployment Claims come out tomorrow, while Friday brings the official Non-Farm Payroll numbers for December. Overall, today’s price action so far looks like consolidation rather than the start of a significant pullback. S&P volatility, as measured by the VIX, suggests that investors see little need to hedge their long side exposure, even as the Dow and S&P hit record highs. Could this indicate excessive complacency? We’ll see.

European stock indices were mostly weaker this morning. Both the Euro Stoxx 50 and French CAC pulled back from all-time highs on profit-taking, as did the UK’s FTSE 100. But investors in German stocks had a clear target in sight as broad-based buying pushed the DAX above 25,000 for the first time in history. Despite a bout of profit-taking, the FTSE continued to trade above 10,000, a level first breached on Friday.

Source: TN Trader

Investor attention in Europe has increasingly turned toward President Trump’s comments regarding Greenland, following the US rendition of Venezuela’s Nicolas Maduro over the weekend. President Trump has reiterated that the US needs the Arctic territory for national security reasons, pointing to Russian and Chinese activity in the region.

The rhetoric prompted swift responses from Denmark and Greenland, with European leaders issuing a joint statement emphasising that Greenland’s future is a matter solely for its people and Denmark to decide.

Meanwhile, Flash Eurozone inflation came in at 2.0% year-on-year, as expected, and finally aligned with the European Central Bank’s (ECB) target. The news helped bolster the conviction that the ECB is set to keep interest rates unchanged for the foreseeable future.

In Forex, the US Dollar Index was little changed in early trade, with the Cash holding just north of 98.00. The Japanese yen emerged as a modest outperformer, with the USD/JPY hovering around 156.50. The yen’s relative strength reflects growing acceptance that the Bank of Japan (BOJ) will continue along its policy normalisation path, creating a divergence with the more dovish outlook for the US Federal Reserve.

Geopolitical tensions have also supported the yen’s safe-haven appeal. However, uncertainty around the timing of the BOJ’s next rate hike and concerns about Japan’s fiscal position have limited more aggressive buying.

The dollar struggled to build on recent gains as markets continue to price in two further 25 basis point rate cuts from the Federal Reserve this year. Investors were also reluctant to increase their exposure to FX in general ahead of this week’s US labour market updates, which culminate in Friday’s Non-Farm Payroll report. The euro was flat despite weaker German Retail Sales data, which showed a larger-than-expected decline in November.

Source: TN Trader

Gold hit $4,500 in late trade on Tuesday and posted its best close since late December when it hit an all-time high of $4,550. But it sold off in the Asian Pacific trade as a round of profit-taking came in. Despite this, the losses were contained, and by mid-morning, gold was still above Tuesday's opening price.

Technically, gold’s bull market looks as if it remains intact. Although traders should expect continued volatility. Gold looks tantalisingly close to taking out its all-time high, and the daily MACD is no longer as overbought as it was ten days ago. As far as the fundamentals are concerned, some analysts believe that the downside for gold appears limited.

Source: TN Trader

Persistent geopolitical uncertainty and expectations for further Federal Reserve rate cuts continue to underpin the non-yielding metal. The dollar’s inability to extend gains has also helped limit selling pressure. Despite this, gold could still drop to $3,800, or even lower, without negating the bullish thesis.

Silver soared around 8% yesterday and posted a fresh all-time closing high, which, depending on one’s charts, saw the spot price end above $82.50. It gave back a significant chunk of these gains overnight. But, at the time of writing, appeared to be consolidating above $79 per ounce.

Silver has had a spectacular recovery so far this year, following its 16% drop from its previous record high at the end of December. Can it continue its bull run from here? Well, anything is possible, and there are plenty of analysts predicting that silver hits $100 or more. But it is notoriously volatile, and there can’t be too many traders who would enjoy the ride, particularly when using leverage.

The daily MACD has pulled back from the extremely overbought conditions at the end of last month, but remains ‘overbought’ historically. Yet, as has been seen on previous occasions, markets can remain overbought or oversold for much longer periods than seemed possible. There’s some light support around $79. But a protracted break below here (NOT a brief spike down) could open up a path back towards $70 per ounce.

Source: TN Trader

Oil prices retreated again. Yesterday’s sharp selloff gave back all of Monday’s brief gains, and more. Front-month WTI dropped below $56 per barrel, having come close to $59 on Monday. Crude oil is now back below the upper resistance line of the recent downtrend, which has been building since the highs of last summer.

Source: TN Trader

President Trump’s pledge to restructure Venezuela’s oil industry and encourage US companies to rebuild infrastructure has raised expectations of higher output over time. As global demand growth continues to slow, the prospect of increased supply acts as a headwind for prices, regardless of geopolitical headlines. Until that balance shifts, oil is likely to remain under pressure.

Natural gas added around 2% this morning, bouncing after recent weakness. Despite the uptick, the market remains highly volatile, with sharp intraday swings continuing to define price action. This remains a trader’s market, where momentum shifts quickly, and conviction is fragile.

Bitcoin and Ether continue to trade near the upper end of recent ranges, yet lack upside follow-through. Crypto markets remain supported by the broader equity rally, but each push higher has met with some selling pressure. But if there is a series of higher lows and higher highs, then Bitcoin and Ether may be in the process of bottoming.

The January VIX held above the 16 level in early trade this morning. This underscored how comfortable investors remain despite elevated geopolitical tensions and a packed macro calendar. Low volatility continues to reflect confidence in the current rally, even as some question whether complacency is creeping in.

There are no major earnings releases on deck today, leaving macro data firmly in the spotlight. ADP Payroll data, the ISM Services PMI and JOLTS Job Openings are all due later today, setting the tone ahead of Friday’s official payroll report.