OPENING CALL
Stock futures rose while 10-year Treasury yields slipped early on Tuesday as reports of more-targeted import tariffs under Donald Trump crimped inflation fears and bolstered traders' risk appetite.
Bloomberg reported late Monday that Trump's economic team was considering a more cautious approach to tariffs that may prove less inflationary than investors had feared.
Still, inflation pressures remain in focus, with the December producer price index report due at 8.30 a.m. ET and the consumer price index expected on Wednesday.
Economists polled by The Wall Street Journal forecast prices rose 0.4% in December, from November.
Stocks to Watch
Aehr Test Systems slumped 21% after it swung to a fiscal second-quarter loss and said that growth in silicon carbide sales outside of China should remain challenging before recovering in 2026.
IAC said its board had approved the spinoff of Angi, which it bought in 2017. IAC shares were inactive while Angi stock rose 9%.
KB Home rose 9% after it posted fourth-quarter earnings that rose from a year earlier as revenue jumped to $2 billion.
Nvidia was up 2%, rebounding from Monday's decline of 2% after the Biden administration outlined new rules on the export of advanced AI chips. Micron Technology also rebounded and was trading up 1.9% in premarket trading.
Palantir Technologies gained 3.5% but Jefferies said late Monday the stock may face more downside on multiple compression risks.
ServiceTitan reported a fiscal third-quarter loss of $1.74 a share, wider than a loss of $1.53 a year earlier. The stock fell 3.1%.
Staffing 360 Solutions provided an update to its merger agreement with Atlantic International and one of its subsidiaries, A36 Merger Sub. Shares rose 43%.
Watch For:
PPI for Dec; Federal Reserve Bank of Kansas City President Jeffrey Schmid speaks before the Central Exchange; Fed of New York President John Williams speaks at the annual "An Economy That Works for All" event; earnings from Applied Digital and Calavo Growers
Today's Top Headlines/Must Reads:
-The Hottest Ticket Across Corporate America: Trump's Inauguration
-Israel, Hamas Are Finalizing a Gaza Cease-Fire Agreement
-China Reins In Its Once-Freewheeling Finance Sector With Purges and Pay Cuts
MARKET WRAPS
Forex:
The dollar turned lower after rising to its strongest in more than two years against several major currencies.
Danske Bank Research said the greenback's gains look overdone and expects a near-term pullback.
Evidence of a strong economy, dimming prospects of interest-rate cuts and anticipation of inflationary policies and tariffs by Trump have contributed to dollar strength.
"While we recognise the persistence of the U.S. dollar rally has been stronger than anticipated, many dollar-positive factors appear overcrowded."
Jupiter Asset Management said a strong dollar tended to tighten financial conditions around the world, stimulating capital flows into the U.S.
"The outlook for the dollar is therefore crucial to the outlook for U.S. bonds. However, a strong dollar could be particularly counterproductive to Trump's goal of boosting U.S. industrial exports."
The pound edged higher after it fell on Monday to a two-year low against the dollar and its weakest in 10 weeks against the euro.
However, it remains vulnerable to rising bond yields and economic weakness, and more so than the euro, Commerzbank said.
The Bank of England's limited scope to cut interest rates means U.K. growth could struggle to recover and the pound is suffering accordingly, Commerzbank added.
ING said sterling remains vulnerable due to high gilt yields and ahead of Wednesday's U.K. inflation data.
Stronger-than-expected inflation data could exacerbate selling in gilts, pushing yields higher and weighing on sterling.
The yen wavered around six-month lows against the dollar as markets await key economic releases from the U.S. and Japan, including next week's BOJ rate decision, DHF Capital said.
A hike is widely expected, but uncertainty about the BOJ's long-term policy direction weighs on sentiment.
Bonds:
The selling pressure on government bond markets was subsiding but bond markets were not out of the woods yet, Commerzbank Research said.
Real yields were rising to historic highs ahead of Wednesday's U.K. and U.S. CPI data.
"German long-end real yields are now at the highest level since the 30-year linker was first launched in 2015, and the dynamics look similar in the U.S. and even more extreme in the U.K."
Russell Investments said even a mildly higher-than-expected inflation report on Wednesday could cause a selloff in bonds and equities.
The exceptionally strong jobs report last Friday seems to have woken up inflation worries from their hibernation, the investment firm added.
"While we think U.S. Treasury yields are attractive at these levels, we still think investors would benefit from sticking close to their longer-term weights unless we get more of a pickup in yields."
Energy:
Oil eased slightly in early trade after rallying to a multi-month high as the market weighs the impact of U.S. sanctions on Russian supplies.
Both Brent crude and WTI benchmarks remain elevated amid signs of market tightness as front futures oil contracts outperform longer-dated ones.
"These sanctions have the potential to take as much as 700,000 b/d of supply off the market, which would erase the surplus that we are expecting for this year," ING said.
"However, the actual reduction in flows will likely be less, as Russia and buyers find ways around these sanctions."
Metals:
Gold rose in early trade as traders await this week's inflation data.
Futures were boosted by a softer dollar and concerns over the impact of potential trade tariffs on inflation after Trump takes office.
Prices fell in the previous trading session amid a stronger dollar and rising Treasury yields, but the long-term outlook for gold remains positive.
Copper Outlook
Expectations of a stronger dollar, looming tariffs and a potential deceleration in the energy transition under Trump is clouding copper's outlook , BMI said.
"While we still expect that copper will continue to thrive due to climate-driven sentiment, we note that the balance of risks to our relatively bullish outlook is tilted to the downside."
TODAY'S TOP HEADLINES
Google Comes Under U.K. Investigation Over Search Services
U.K. antitrust officials said they were probing Google over its search services and how they may affect competition in the country, the first investigation under a new digital markets competition regime that could force the Alphabet-owned company to make changes to its conduct.
The Competition and Markets Authority said the investigation would seek to gauge Google's sway in search and search advertising services and how it affects consumers and businesses including advertisers, news publishers and rival search engines.
BP Expects to Book Up to $2 Billion in Charges, Sees Lower Upstream Production
BP said it expects to book impairments of $1.0 billion to $2.0 billion in the fourth quarter while upstream production is expected to fall.
The British oil-and-gas giant said on Tuesday that the non-cash, post-tax charges are attributable across its business divisions.
China Officials Discuss Option of TikTok Sale to Elon Musk
SINGAPORE-Chinese officials, facing a looming U.S. TikTok ban, have internally discussed options including the possibility of allowing a trusted non-Chinese party such as Elon Musk to invest in or take control of TikTok's U.S. operations, people familiar with the discussions said.
China has protested a U.S. law that would ban TikTok in the U.S. unless its Beijing-based parent, ByteDance, divests itself of the operation. The Supreme Court last week seemed inclined to let the law stand. It goes into effect on Sunday unless the court issues a stay.
Jamie Dimon Wants to Take JPMorgan Chase to Germany and Beyond
Jamie Dimon is taking JPMorgan Chase on a big adventure.
The long-serving CEO, heading into what he says is his final chapter as chief executive, has set his sights on a major territorial expansion: building a sprawling digital-focused consumer bank outside the U.S.
Oil Prices Are on a Tear. It's a Short-Term Headache for Inflation.
Consumers may not be feeling the effects of rising crude oil prices yet when they pay at the pump, but the uptick could start appearing in the next round of inflation data.
Oil prices have been on a tear since the start of the year, with Brent crude hitting $80 a barrel on Monday. And West Texas Intermediate (WTI) crude oil, the benchmark for the U.S. market, was up 2%-over $78 a barrel.
U.K. Borrowing Costs Ease Amid Signs of Stabilization
U.K. borrowing costs eased and the British pound edged higher Tuesday, marking some signs of stabilization, with Treasury Chief Rachel Reeves set to face questions in Parliament later around the recent turmoil in bond markets.
The 10-year gilt yield was recently down one basis point to 4.860%, Tradeweb data show. The 30-year gilt yield also nudged down one basis point to 5.418%. Long-dated gilt yields hit multi-year highs last week, part of a global fall in bonds amid investor concerns over the slower pace of rate cuts by the U.S. Federal Reserve.
Producer Inflation Expected to Stay Stubbornly High
The first of a pair highly anticipated inflation reports will land on Tuesday, with markets on edge and traders betting on little-to-no easing by the Federal Reserve in 2025.
With a solid economic and labor market backdrop, policymakers will need to see progress resume on slowing inflation to resume their interest-rate cuts. And that's far from a sure bet these days.
Germany Puzzles at Elon Musk's Embrace of Its AfD Populists
(MORE TO FOLLOW) Dow Jones Newswires
01-14-25 0619ET
