Resurgent Inflation Worries Keep Lurking In Fed Chair Comments, Wall Street Indexes Remain Under Pressure

Alexander Garcia
11 Feb, 2025
Miami

Wall Street indexes wavered around the flatline after Fed Chair Powell confirmed that inflation is slowing but remains above the long-term target rate. 

Market participants were cautiously optimistic after Chairman Powell confirmed that the U.S. economy is on solid footing and the labor market remains strong, and the central bank is in no hurry to lower rates in the near future. 

However, on Wall Street, benchmark indexes struggled to advance amid growing fears of a wider trade war sparked by the chaotic Trump administration and fears of resurgent inflation. 

The S&P 500 index decreased 0.2%, and the Nasdaq Composite declined 0.6% after the latest salvo of Trump tariffs targeted steel and aluminum imports. 

Wall Street indexes traded down in the early hours amid growing worries that the chaotic and unpredictable Trump administration could launch a wider trade war, halting global economic growth and making the U.S. economy more vulnerable to recession.

The latest 25% tariffs on steel and aluminum product imports appear to be driven by motivation to force two neighbors, Canada and Mexico, to toe the White House's line and have little basis in trade economics or the need of the U.S. consumers.

The latest version of the announced tariff will cover steel and aluminum shipments from all countries, including key suppliers, Brazil, South Korea, China, Japan, and the European Union. 

The European Union said it plans to announce its retaliatory tariffs in the near future, and other countries are also looking for ways to impose their retaliatory measures.

European Union Commission President Ursula von der Leyen said in a statement released on Monday, “Unjustified tariffs on the EU will not go unanswered—they will trigger firm and proportionate countermeasures.”

The growing prospects of a wider trade war are also going to be on the minds of lawmakers as Federal Reserve Chairman Jerome Powell is scheduled to appear before the Senate Banking Committee later today and the House Financial Services Committee on Wednesday.

Fed Chair Powell's testimony will start at 10:00 a.m. for both appearances. 

The ever-widening set of tariffs and the expanding set of trade partners covered by higher trade barriers is certainly going to stoke inflation, making the Fed policymakers job harder. 

The Federal Reserve is likely to hold off on any imminent rate cuts in the near future until solid evidence emerges that inflation is still on a sustainable downward slide towards the 2% target rate.

 

U.S. Indexes and Treasury Yields

The S&P 500 index decreased 0.24% to 6,051.80, the Nasdaq Composite edged down 0.6% to 19,598.92, and the Russell 2000 index was down 0.5% to 2,276.74.

The yield on 2-year Treasury notes edged higher to 4.30%, 10-year Treasury notes increased to 4.54%, and 30-year Treasury bonds advanced to 4.75%.

WTI crude oil increased $1.14 to $73.46 a barrel, and natural gas prices edged higher by $0.08 to $3.53 a thermal unit.

Gold decreased by $20.09 to 2,897.44 an ounce, and silver edged down by $0.45 to $31.62.

The dollar index, which weighs the US currency against a basket of foreign currencies, decreased 0.12 to 108.21 and traded at a two-year high.

 

U.S. Stock Movers 

Vertex Pharmaceuticals Inc. dropped 0.4% to $467.98 after the biotech company posted lower income in the fourth quarter ending in December.

Astera Labs Inc. dropped 4.5% to $98.65 despite the provider of fabric switches for artificial intelligence products reporting strong fourth-quarter sales and profit growth.

Lattice Semiconductor Corp. surged 13.9% to $62.04 despite the maker of low-power field-programmable gate arrays reporting weak fourth-quarter results.

The stock jumped in trading because the company's revenues were ahead of some investors' estimates. 

Coca-Cola Company jumped 6.8% to $66.97 after the beverage maker's fourth quarter revenue and earnings surpassed market expectations, driven by higher prices and a slight increase in case volumes. 

 

European Markets Hover Near Record Highs Amid Earnings Optimism

Stock market indexes in Europe hovered near recent highs as investors focused on the latest batch of positive earnings. 

Benchmark indexes in Frankfurt, Paris, Milan, and London wavered around the flatline, and more than 50 companies reported earnings in the currency union. 

Investors reacted to the latest quarterly results from BP plc, Kering SA, UniCredit SpA, and ams-OSRAM.

Thyssenkrupp and Salzgitter dropped 1% after the U.S. announced a 25% tariff on all imports of steel and aluminum products beginning March 4.

The latest round of tariffs appears to placate the most extreme wing of the Republican Party, and the proposed import tax will stoke inflation and provide another reason for the Federal Reserve to hold higher interest rates for longer. 

 

France's Jobless Rate Edged Lower In Fourth Quarter

Closer to home, France's jobless rate unexpectedly dropped marginally in the fourth quarter. 

The unemployment rate decreased to 7.3% from 7.4% in the third quarter, according to the latest data released by INSEE, France's statistical office. 

The number of unemployed people declined by 63,000 from the previous quarter to 2.3 million. 

The unemployment rate in the age group between 15 and 24, the so-called youth jobless rate, edged down by 0.8 percentage point to 19%. 

The jobless rate in the age group between 25 and 49 eased by 0.1 percentage point to 6.5%, and for those above the age of 50 and over, it increased by 0.1 percentage point to 4.8%. 

 

Europe Indexes and Yields

The DAX index increased by 0.10% to 21,934.27, the CAC-40 index edged lower 0.05% to 8,001.99; and the FTSE 100 index advanced by 0.05% to 8,772.53.     

The yield on 10-year German bonds inched higher to 2.41%, French bonds increased to 3.14%, the UK gilts moved up to 4.60%, and Italian bonds edged higher to 3.51%.

The euro increased to $1.03; the British pound was lower at $1.24; and the U.S. dollar was higher and traded at 91.29 Swiss cents.

Brent crude increased $1.08 to $76.95 a barrel, and the Dutch TTF natural gas was higher by €0.17 to €49.91 per MWh.

 

Europe Stock Movers 

Novartis AG was nearly unchanged at CHF 96.94, and the Swiss pharmaceutical company agreed to acquire Anthos Therapeutics for $3.1 billion. 

BP plc decreased 0.6% to 462.30 pence, and the British oil company reported a steep decline in profit in the fourth quarter. 

UniCredit SpA decreased 2.8% to €45.93, and the Italian bank estimated a moderate decline in net interest margin in 2025 and reported better-than-expected 2024 earnings.

Kering SA increased 1.1% to €246.90 after the Paris-based luxury group posted better-than-expected revenue in the fourth quarter. 

Entain PLC plunged 10.5% to 667.32 pence after the UK-based online gambling company's chief executive Gavin Issacs stepped down immediately after six months in the office. 

ams-OSRAM AG jumped 16.8% to CHF 7.95, and the Austrian semiconductor company posted weak sales in the first quarter but held out for a strong recovery in automotive electronics in the fiscal second half.

 

Chinese Companies Look Beyond U.S. Tariffs, Stock Indexes Half Four-Month Rally 

Stock market indexes in China and Hong Kong dropped, and investors reviewed the latest round of new tariffs announced by the U.S. 

The Hang Seng index and CSI index dropped about 0.6% in choppy trading after the U.S. announced 25% tariffs on steel and aluminum imports with "no exemptions or exceptions."

The U.S. imports most of its steel products from Canada, Brazil, China, and South Korea.

The steel tariffs are slated to be imposed from March 4, and they will be in addition to 10% tariffs on all Chinese imports. 

The Trump administration is looking to raise additional federal government revenue, and the tax on imports is the new source that the administration has identified.

The tariffs on imports, which are indirect taxes and paid by all Americans, provide a new source of government revenue as the Trump administration prepares to pass a tax cut for wealthy donors who bankrolled his presidential election. 

Chinese manufacturers have accelerated their plans to diversify their manufacturing base away from China and stepped up their efforts to increase shipments to other countries and regions in the world. 

Over the last six years, Chinese companies have increased their manufacturing presence in Mexico, Vietnam, the ASEAN region, Hungary, and Brazil. 

The offshore Chinese yuan hovered near 7.30 against the U.S. dollar as the U.S. launched a new round of tariffs targeting products shipped by China, Canada, Mexico, and Brazil. 

 

China Stock Movers 

The Hang Seng index declined 0.6% to 21,404.70, and the CSI 300 index dropped 0.5% to 3,883.22.

Electric vehicle makers traded down on the worries that the next set of tariffs on Chinese imports will include advanced electronic products. 

Li Auto declined 5% to HK $100.20, BYD dropped 0.2% to HK $329.60, Xpeng plunged 9% to HK $62.05, and Geely Automobile Holding declined 10.5% to HK $15.82.

Separately, BYD said it plans to install autopilot systems on almost all of its models as early as this year.

Zijin Mining Group advanced 1.7% to HK $16.42 after the international spot price of gold advanced and traded at a new record high of $2,910.85.