US markets ended on a high note Tuesday, with the S&P 500 reaching a new record as investors brushed aside concerns over inflation and global trade uncertainty. The index closed higher alongside the Nasdaq and Dow, driven by gains in energy and tech stocks, despite some weakness in consumer discretionary and communication services. Optimism surrounding potential Federal Reserve policy adjustments helped sustain the market’s upward momentum, while chip stocks provided crucial support. However, ongoing tariff discussions and corporate earnings reports kept investors cautious about the road ahead.

Key Takeaways:

  • S&P 500 Sets Fresh Record High: The S&P 500 gained 0.24%, closing at 6,129.58, marking a new all-time high. The index’s late-session rally was driven by strength in the energy sector, which surged 1.9%, with Halliburton and Valero Energy leading the advance. 
  • Dow Higher Amid Choppy Trading: The Dow Jones Industrial Average closed the session up by just 10 points (0.02%), finishing at 44,556.34. Despite the modest gain, the Dow has advanced 0.6% over the past week, benefiting from optimism surrounding US tariff policies.
  • Nasdaq Holds Gains as Tech Stocks Face Mixed Performance: The Nasdaq Composite edged up by 0.07% to 20,041.26, continuing its upward trajectory despite notable losses in major tech names. While Intel soared over 16%, fuelled by reports of potential deals involving TSMC and Broadcom, stocks like Meta Platforms (-3%), Amazon (-2%), and Alphabet, Tesla, and Apple (all closing lower) tempered the index’s gains. 
  • European Markets Extend Gains as Defence Stocks Rally: European indices continued to climb, with the Stoxx 600 rising 0.32% to 557.17, hitting another record high. The DAX surged to 22,850, marking new highs, while the CAC 40 gained 0.4%, surpassing 8,220. The FTSE 100, however, was little changed, dipping 1.28 points (-0.01%) to 8,766.73. Meanwhile, the FTSE MIB climbed 239 points (0.62%). The UK labour market showed resilience, with private sector pay excluding bonuses rising 5.9% year-on-year in the three months to December, compared to 5.6% in the previous quarter. The UK’s unemployment rate held steady at 4.4%, unchanged from the prior quarter but up 0.5 percentage points year-on-year.
  • Asia-Pacific Markets Trade Mixed Following Xi’s Remarks: Asian markets showed a mixed performance after Chinese President Xi Jinping encouraged the private sector to play a stronger role in economic growth. Japan’s Nikkei 225 closed 0.25% higher at 39,270.40, while the Topix Index gained 0.31% to 2,775.51. South Korea’s Kospi rose 0.63% to 2,626.81, with the Kosdaq advancing 0.67%. However, China’s CSI 300 lost 0.88%, closing at 3,912.78, reflecting continued investor caution. In contrast, Hong Kong’s Hang Seng Index jumped 1.59% to 22,976.86, led by a 2.54% gain in the Hang Seng Tech Index. Australia’s S&P/ASX 200 fell 0.66% to 8,481, as the Reserve Bank of Australia (RBA) cut interest rates by 25 basis points to 4.1%, its first rate cut in over four years.
  • US Treasury Yields Rise Ahead of Fed Minutes: Bond markets saw higher yields as investors awaited the upcoming Federal Open Market Committee (FOMC) meeting minutes for further signals on interest rates. The 10-year Treasury yield increased by 8 basis points to 4.556%, while the 2-year Treasury yield climbed more than 4 basis points to 4.308%. The rise in yields follows a sell-off in European bonds amid expectations of increased government spending on defence.
  • Oil Prices Climb as Ukraine Drone Strike Hits Supply: Oil prices advanced after a drone attack on a Russian oil pipeline pumping station disrupted supply from Kazakhstan. Brent crude futures gained $0.62 (0.82%) to close at $75.84 per barrel, while West Texas Intermediate (WTI) crude surged $1.11 (1.57%) to $71.85 per barrel. 

FX Today:

  • EUR/USD Struggles to Hold Ground as Dollar Strengthens: The EUR/USD pair declined, trading near 1.0445, down by 0.35%. The pair attempted to move higher but faced resistance near the 50-day Simple Moving Average (SMA) at 1.0399, preventing further gains. The overall bearish structure remains intact unless the pair clears the 100-day SMA at 1.0571. Stronger-than-expected US economic data and renewed safe-haven demand for the greenback have contributed to the Euro’s weakness. The pair needs a decisive break above 1.0571 to confirm further upside, while key support lies at 1.0399. A failure to hold this level could accelerate selling pressure, potentially pushing the pair toward the 1.0300 zone.
  • GBP/USD Struggles to Extend Gains Amid Resistance at 1.2620: The British Pound has held onto recent gains against the US Dollar, with GBP/USD trading around 1.2600, down by 0.18%. The pair rebounded from its January lows and climbed above the 50-day SMA at 1.2470, signalling improving bullish momentum. However, upside remains limited by the 100-day SMA at 1.2681, which acts as a key resistance level. If GBP/USD breaks above 1.2680, further gains could push the pair toward the 200-day SMA at 1.2788. A failure to clear resistance could trigger a pullback toward the 50-day SMA at 1.2470, with further downside targeting 1.2400. 
  • AUD/USD Holds Steady as RBA Rate Cut Fails to Shake Markets: The AUD/USD pair held steady, trading around 0.6350, down by 0.04%. The pair has maintained its position following the Reserve Bank of Australia’s (RBA) decision to cut interest rates by 25 basis points to 4.1%, marking the first cut in over four years. While the RBA’s move was largely anticipated, the Australian Dollar continues to trade in a modest uptrend. The pair has climbed above the 50-day SMA at 0.6264, signalling a short-term bullish bias, though it remains below the 100-day and 200-day SMAs. Immediate resistance is seen at 0.6400, with further gains possible if the pair sustains a breakout toward 0.6656 (200-day SMA). On the downside, key support is found at 0.6264, with a break below this level potentially triggering further declines toward 0.6200.
  • USD/CAD Trades Flat as Inflation Data Clouds Rate Outlook: The USD/CAD pair remained stable, trading near 1.4185, up by 0.05%. Canada’s annual inflation rate edged up to 1.9% in January from 1.8% in December, in line with expectations. Core inflation measures also ticked higher, with CPI-median rising to 2.7% from 2.6% and CPI-trim increasing to 2.7% from 2.5%. Despite the slight uptick, traders have priced in a 63% chance that the Bank of Canada will leave rates unchanged in March, up from 56% before the inflation data was released. USD/CAD remains below the 50-day SMA at 1.4333, reinforcing a bearish sentiment. The next key support level is found at the 100-day SMA near 1.4100, with further downside targeting the 200-day SMA at 1.3880. However, a rebound above 1.4330 could shift momentum in favour of buyers, with resistance seen at 1.4500.
  • Gold Gains as Market Uncertainty Drives Safe-Haven Demand: Gold prices extended their rally, with XAU/USD trading around $2,933 per ounce, up by 1.22%. The precious metal remains well-supported as investors seek safe-haven assets amid economic uncertainties. Gold has consistently held above the 50-day SMA at $2,727, reinforcing the uptrend. With the 100-day SMA at $2,697 and the 200-day SMA at $2,564, the technical structure remains bullish as long as prices stay above these levels. The next key resistance is seen at $2,950, followed by the psychological $3,000 mark. A break above this level could extend gains toward fresh highs. On the downside, immediate support lies at $2,900, with a deeper correction likely if prices drop below the 50-day SMA at $2,727. Overall, gold remains in a strong uptrend, with any pullbacks likely to be seen as buying opportunities by investors.

Market Movers:

  • Intel surges on potential breakup reports: Intel (INTC) soared 16%, topping the Nasdaq 100 leaderboard, following a Wall Street Journal report that TSMC and Broadcom are considering deals involving the breakup of the semiconductor giant. 
  • Micron and GlobalFoundries jump on chip sector momentum: Micron Technology (MU) climbed 7%, while GlobalFoundries (GFS) added 6%, as semiconductor stocks rallied on Intel’s potential restructuring. Lam Research (LRCX) also gained 4%, and Microchip Technology (MCHP) rose 3%, reflecting broad investor enthusiasm for the sector.
  • Meta and Amazon drag tech lower: Despite strength in chip stocks, major tech names saw losses, with Meta Platforms (META) falling 3% and Amazon (AMZN) dropping 2%. Investors reacted cautiously as concerns about regulatory challenges and consumer spending trends weighed on these high-growth names. 
  • Delta Airlines falls after Toronto incident: Delta Airlines (DAL) declined 1.61% after reports that a Delta jet flipped over on the runway in Toronto. The incident raised concerns about operational safety and potential disruptions in air travel.
  • Medtronic sinks on revenue miss: Medtronic (MDT) plummeted more than 7% after the company reported fiscal Q3 revenue below analyst expectations. The weaker-than-expected results raised concerns about the company’s growth outlook, driving investors to sell off shares.

As markets wrapped up the day, investors navigated a mix of record highs and ongoing economic uncertainties. The S&P 500 reached a new all-time high, while the Nasdaq saw gains driven by a surge in Intel and semiconductor stocks, though weakness in Meta and Amazon weighed on the broader tech sector. The Dow Jones struggled to gain momentum, reflecting investor caution amid global trade concerns and inflationary pressures. In Europe, markets continued their upward trend, with defence stocks extending their rally, while Chinese equities gained following President Xi’s reassurance to the private sector. Gold prices climbed as investors sought safe-haven assets, while oil prices rose after a Ukraine drone attack disrupted supply from Kazakhstan. With Federal Reserve meeting minutes and further economic data releases ahead, market sentiment remains sensitive to policy shifts and geopolitical developments.