4:20pm: Wall Street pauses ahead of CPI report
US stocks pulled back on Tuesday as investor attention turned from post-election bliss to Wednesday's CPI report.
At the close, the Dow had dropped nearly 0.8%, shedding almost 350 points. The S&P 500 declined over 0.2%, while the tech-focused Nasdaq slipped around 0.1%, trimming earlier losses.
Investors might be questioning if recent gains were overdone and considered President-elect Donald Trump’s Cabinet picks and their policy implications.
Trump's potential Cabinet, including China hawks like Marco Rubio for Secretary of State, raised concerns about possible inflationary effects from tariffs. Opinions are mixed on whether Trump’s policies will spur inflation, as his low-tax, high-tariff stance might weaken the US dollar long-term, despite recent short-term strength.
Analysts, including those at Wells Fargo, anticipate a 0.2% monthly increase in October’s Consumer Price Index (CPI), bringing the annual inflation rate to 2.5%. Investors are now focused on Wednesday’s CPI report for further signs of inflation trends.
2:45pm: US dominance expected to continue
US markets are expected to continue to dominate on growth, earnings and momentum, according to XTB research director Kathleen Brooks.
“The US is expected to grow at a faster rate than Europe and the UK in the coming years. The IMF’s US growth forecast for 2025 is 2.2%, in Europe and the UK it is 1.2%,” Brooks said.
“Thus, the US is expected to grow at nearly double the rate of European economies, which adds to its exceptionalism and the attractiveness of its stock market over European markets.”
During the third quarter, European shares have underperformed expectations while US stocks have outperformed.
“This adds to the attractiveness of the US stock market,” Brooks said. “It feels like US stocks have such an advantage over the European stocks that they may not be able to play catch up.”
1:30pm: China hawks in cabinet
Trump's appointment of two China hawks to key positions in his incoming administration could signal an aggressive and unpredictable approach to US-China tech relations, analysts at Jefferies have flagged.
Reports out of Washington DC indicate that Trump may appoint Florida Senator Marco Rubio as his Secretary of State and Mike Walz as National Security Advisor.
That could mark a potential escalation in the tech war, Jefferies warned.
Unlike Biden's more ideology-driven and collaborative approach with allies, Trump is expected to focus on direct, unilateral restrictions.
Three major areas of concern are anticipated: strict limitations on advanced semiconductor exports to China, with companies like TSMC and Samsung potentially barred from making chips of 7nm or below for Chinese firms; possible restrictions on countries where Chinese companies are developing AI capabilities, with less emphasis on ally cooperation; and a return to risks of Chinese ADR delistings and broader U.S. investment bans in Chinese companies.
Trump's past actions, including high tariffs, sanctions on Chinese firms like Huawei, and efforts to delist Chinese companies, indicate a pro-business yet aggressive approach that may intensify tensions and leave China with limited avenues to navigate U.S. restrictions.
12:25pm: Pullback
US stocks retreated on Tuesday after its post-election rally.
The Dow fell nearly 200 points, or 0.4%, while the S&P 500 and Nasdaq each slipped about 0.2%. This pullback occurred amid a rise in Treasury yields, with the 10-year yield climbing to around 4.39%.
Concerns started to grow around Trump’s Cabinet picks, such as Florida Senator Marco Rubio for Secretary of State, whose strong stance on China could lead to higher tariffs and inflation concerns.
Meanwhile, Bitcoin’s record rally cooled, having nearly reached $90,000 before retreating to around $86,340.
Elsewhere, stocks tied to "Trump trades" also eased, with Tesla and Coinbase shares slipping after recent gains. Investors are now turning their attention to upcoming inflation and retail sales data, which may influence the Federal Reserve’s policy direction at its December meeting.
11:05am: 'Sticky' inflation strengthening dollar
The US dollar is strengthening due to the perception that inflation could stay elevated, which may push the Federal Reserve to keep interest rates higher for longer, Quincy Krosby, Chief Global Strategist for LPL Financial noted.
"The dollar has been edging higher even before the election as the currency market began to factor in the possibility that inflation could be set to tick higher - - or remain 'sticky' - - requiring the Fed to hold off declaring victory over its campaign to quell inflation," Krosby wrote.
"Following the election there are also questions as to the extent and timing of the Trump administration's tariff agenda and the ensuing effect on prices and inflation, which would impact the dollar.
"Inflation-related data releases take on heightened importance as markets try to ascertain whether the Fed can, absent weakness in the labor market, deliver the rate cut cycle it had expected just a few months ago--- and whether the already extended market can withstand the possibility that the Fed could remain higher for longer."
10.10am: Could the next Disney CEO come from the gaming world?
Walt Disney Co (NYSE:DIS) is "exploring fresh candidates" to replace CEO Bob Iger, the Wall Street Journal is reporting, including Electronic Arts boss Andrew Wilson.
Sources have told the paper that Wilson's name is one of those that has come up in the searches from headhunter Heidrick & Struggles.
The search firm has reportedly identified at least two other potential external candidates too.
9.55am: Mixed start
It's been a mixed start on Wall Street so far.
The Dow Jones is flat, the Russell 2000 is down 0.3%, but the S&P 500 and Nasdaq are both up a tad, around 0.1%.
Tech giants are mostly higher, including Nvidia up 1% and Meta Platforms 2%, but Apple and Tesla are in the red, down 0.2% and 2.4% respectively.
8am: US stocks set for small drop
US stocks are set to join Europe and Asia in the red on Tuesday as traders put the brakes on the post-election rally.
However, falls on Wall Street are not expected to be large, according to the futures market.
S&P 500 and Nasdaq 100 futures are both down 0.1%, with Dow Jones futures currently just the wrong side of flat.
Futures contracts for the Russell 2000, after the small-cap index surged 10% since the election, are down 0.5%.
Meanwhile, bitcoin continued to blast higher overnight, within kissing distance of $90k.
The reason stock futures are in the red, says market analyst Joshua Mahony at Scope Markets, is that US bond traders are returning from their Veterans Day holiday and "question the momentum behind this post-election rally".
With the S&P 500 having topped 6,000 for the first time last week, and hit a new intraday high yesterday, stock markets are seeing some profit-taking ahead of tomorrow’s critical inflation report, says Mahony.
"The perception that Donald Trump will spark a fresh wave of inflation through a combination of tariffs and increased spending has pushed treasury yields higher, and we are seeing them push higher once again after a recent pullback."
The US CPI inflation is expected to push higher tomorrow, but Mahony says traders and investors "should be careful to draw any conclusions given the fact that this is largely down to base effects. The disinflationary pressures should resume next time around".
New York-listed earnings today include Shopify Inc, Spotify Technology SA, The Home Depot Inc, Marathon Digital Holdings Inc and Occidental Petroleum Corporation.
Shares in Live Nation Entertainment Inc (NYSE:LYV) are up 6.5% in pre-market trades after the Ticketmaster parent reported a 6% fall in revenue but substantially better margins.
Home Depot Inc is up 1.7% pre-market after the home improvement retailer reported third-quarter comparable sales dropped by 1.3% and were expected to decline about 2.5% this year, which was not as bad as the 3-4% fall it had previously guided.
In other company news, 23andMe announced plans to cut 40% of its workforce as part of a cost-saving effort aimed at stabilising the genetic testing company.