Stocks Rise as Markets Eye Inflation, Fed Policy, and Trade Tensions

U.S. stock futures edged higher on Monday, signaling a positive start to a week filled with major economic developments. Investors are closely watching updates on President Donald Trump’s trade policies, key inflation data, and Federal Reserve Chair Jerome Powell’s testimony. The focus remains on Wednesday’s Consumer Price Index (CPI) report, expected to show a 0.3% rise in core inflation for January, up from December’s 0.2% increase. Powell’s remarks will be analyzed for insights into the Fed’s monetary policy stance, particularly in light of strong economic resilience and persistent inflation concerns. Additionally, manufacturing output and retail sales data will provide further clarity on economic momentum and consumer sentiment.

Markets are bracing for heightened trade tensions as Trump moves forward with new tariffs. As of Monday, a 25% duty has been imposed on steel and aluminum imports, with China retaliating by levying tariffs on $14 billion worth of U.S. goods. These new tariffs add to those retained from Trump’s first term and are expected to impact major exporters to the U.S., including Canada, Brazil, and Mexico. While Trump initially delayed similar tariffs on Canada and Mexico due to security assurances, analysts warn that further trade disruptions could fuel inflation, complicating the Fed’s policy outlook.

Despite trade concerns, the S&P 500 rebounded Monday, led by technology stocks. Nvidia (NASDAQ:NVDA) surged 3% after Evercore ISI described the recent pullback as a buying opportunity, dismissing concerns about competition from AI rival DeepSeek. Broadcom (NASDAQ:AVGO) gained 4.5%, and Amazon (NASDAQ:AMZN) rose 1.7%. However, Tesla (NASDAQ:TSLA) dropped 3% following reports that CEO Elon Musk was leading a bid to acquire OpenAI’s controlling nonprofit entity for $97.4 billion.

Steel and aluminum stocks soared following Trump’s tariff announcement. Nucor (NYSE:NUE), U.S. Steel, and Steel Dynamics (NASDAQ:STLD) all climbed over 4%, while Cleveland-Cliffs (NYSE:CLF) jumped 18%, Century Aluminum (NASDAQ:CENX) gained 10%, and Alcoa (NYSE:AA) rose about 2%. Meanwhile, U.S. Steel (NYSE:X) saw increased investor interest amid reports that Japan’s Nippon Steel was reconsidering its acquisition strategy for the company.

Energy stocks benefited from rising oil prices, anticipating potential supply disruptions due to trade tensions. BP (NYSE:BP) climbed over 6% following reports that Elliott Investment Management had acquired a stake and was advocating for shareholder-friendly reforms. Activist investors pointed to BP’s valuation lagging behind peer Shell, arguing for strategic changes to enhance shareholder value.

Corporate earnings continued to drive market sentiment, with fourth-quarter results surpassing expectations. S&P 500 earnings grew 12% year-over-year, exceeding the 8% forecast at the start of earnings season. However, Goldman Sachs strategists warned that the ongoing tariff war could pressure 2025 earnings, with heightened policy uncertainty weighing on equity valuations. They estimated that a 5-percentage-point tariff increase could reduce S&P 500 EPS by 1-2%, potentially leading to higher consumer prices.

Meanwhile, McDonald’s stock jumped 4.8% after reporting a surprise rise in global comparable sales, driven by strong performance in the Middle East and Japan. Rockwell Automation (NYSE:ROK) surged 12.6% on better-than-expected fiscal first-quarter earnings. Lyft (NASDAQ:LYFT) rallied over 6% after announcing plans to deploy fully autonomous robotaxis powered by Mobileye (NASDAQ:MBLY) in Dallas by 2026, prompting a 12% jump in Mobileye shares.

Several major companies are set to report earnings this week, including McDonald's (NYSE:MCD), Coca-Cola (NYSE:KO), and Cisco Systems (NASDAQ:CSCO). AI-related developments remain in focus, especially after the emergence of a low-cost AI model from China’s DeepSeek. Nvidia’s upcoming earnings report is expected to be a major catalyst for AI-driven stock movements.

Goldman Sachs maintains a bullish outlook, forecasting a 7% rise in the S&P 500 to 6,500 by year-end. The firm notes a shift in earnings growth dynamics, with the "Magnificent 7" tech stocks seeing more balanced contributions from the broader index. Meanwhile, Evercore ISI projects the S&P 500 reaching 6,800 by the end of 2025 but anticipates volatility amid trade conflicts. The bank advises a defensive investment strategy, favoring stocks with strong buyback programs and low volatility, while also highlighting opportunities in AI-focused companies.

This week’s CPI report is expected to show a modest slowdown in headline consumer price growth, aligning with December’s annualized rate. However, core inflation could remain elevated, limiting the Fed’s ability to cut interest rates. With inflation still above the central bank’s 2% target, Powell’s testimony will play a crucial role in shaping market expectations for future policy moves. With new tariffs in place and key economic data under scrutiny, investors should prepare for potential volatility in the coming days.

Data for Technical Analysis (1D) CFD US 500 [S&P 500]

Resistance : : 6069.2, 6078.2, 6092.6

Support : 6040.4, 6031.4, 6017.0             

1D Outlook 

Source: TradingView

Buy/Long 1 If the support at the price range 5990.4 - 6040.4 is touched, but the support at 6040.4 cannot be broken, the TP may be set around 6073.8 and the SL around 5965.4, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 6069.2 - 6119.2, TP may be set around 6125.0 and SL around 6015.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 6069.2 - 6119.2 is touched, but the resistance at 6069.2 cannot be broken, the TP may be set around 6036.0 and the SL around 6144.2, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 5990.4 - 6040.4, TP may be set around 5986.0 and SL around 6094.0, or up to the risk appetite.       

Pivot Points Feb 11, 2025 02:03AM GMT