The US stock market attempted a recovery on Monday but failed to sustain momentum as investors remained cautious following last week’s sharp sell-off. Tech stocks continued to face pressure, with major names like Nvidia and Palantir leading declines, while renewed concerns over tariffs from the Trump administration further weighed on sentiment. The Dow managed to post a small gain, but the S&P 500 and Nasdaq closed lower, reflecting broader uncertainty in the markets. Meanwhile, European stocks struggled despite post-election gains in Germany, and Asian markets mostly declined amid persistent concerns over economic growth and inflation. With key earnings reports and economic data expected later this week, including the Federal Reserve’s preferred inflation gauge, traders remain on edge as they assess the outlook for interest rates and global trade.

Key Takeaways:

  • S&P 500 Extends Decline After Friday’s Sell-Off: The S&P 500 slipped 0.5% to close at 5,983.25 on Monday as investor sentiment remained fragile following last week’s sharp sell-off. The index struggled to recover from Friday’s 1.7% drop, with concerns over economic data and inflation keeping traders on edge. 
  • Nasdaq Tumbles as Tech Stocks Weigh on Market: The Nasdaq Composite fell 1.21% to 19,286.92, dragged lower by sharp losses in major technology names. Palantir plummeted 10.5%, leading declines, while Nvidia fell 3% ahead of its crucial earnings report on Wednesday. 
  • Dow Manages a Small Gain, Avoids Further Losses: The Dow Jones Industrial Average gained the broader market weakness, reaching a narrow gain of 33.19 points, or 0.08%, to close at 43,461.21. The blue-chip index was supported by strength in defensive stocks, helping it stabilise after last week’s 700-point drop on Friday. 
  • European Markets Slip as Inflation Concerns Linger: European stocks struggled on Monday as inflation data reinforced expectations that the European Central Bank may remain cautious on policy easing. The pan-European Stoxx 600 index dipped 0.08%, weighed down by a 0.85% drop in France’s CAC 40. Germany’s DAX initially gained following the country’s federal election but pared back gains to close 0.62% (138 points) higher. The FTSE 100 was nearly unchanged, slipping 0.004% to 8,658.98, while Italy’s FTSE MIB added 0.13% to 38,472.6. Inflation concerns persisted as Eurostat confirmed that the eurozone’s annual inflation rate rose to 2.5% in January from 2.4% in December, while core inflation remained steady at 2.7%. Month-over-month, headline inflation fell 0.3%, and core inflation dropped 0.9%, aligning with earlier estimates.
  • Asia-Pacific Markets Mostly Decline as Growth Concerns Persist: Asian stocks mirrored Wall Street’s weakness, with most major indices posting losses. Mainland China’s CSI 300 index edged down 0.22% to 3,969.72, while Hong Kong’s Hang Seng index fell 0.58% to 23,341.61 after touching a nearly three-year high in the prior session. Indian markets saw steeper losses, with the Nifty 50 down 1.08% and the BSE Sensex slipping 1.03%. South Korea’s Kospi dropped 0.35% to 2,645.27, while the small-cap Kosdaq closed 0.17% lower at 773.33. Australia’s S&P/ASX 200 managed to break its five-session losing streak, rising 0.14% to 8,308.20. Japanese markets remained closed for a public holiday.
  • US Treasury Yields Edge Lower Ahead of Key Economic Data: Treasury yields dipped slightly on Monday as investors positioned themselves ahead of a busy economic calendar. The 10-year Treasury yield declined nearly 2 basis points to 4.402%, while the 2-year Treasury yield slipped to 4.175%. 
  • Oil Prices Rebound Following Fresh US Sanctions on Iran: Oil prices recovered modestly on Monday after the US Treasury imposed new sanctions on Iran’s petroleum industry, targeting brokers, shipping operators, and tanker firms involved in crude exports. Brent crude rose 0.5% to settle at $74.80 per barrel, while West Texas Intermediate (WTI) crude climbed 0.61% to $70.83 per barrel. The move comes as Iraq confirmed plans to export 185,000 barrels per day from Kurdistan’s oilfields once shipments resume. Oil prices had dropped sharply in the previous session amid expectations of resumed Iraqi exports and hopes of an end to the war in Ukraine, but the new sanctions helped stabilise the market.

FX Today:

  • Euro Struggles to Build Momentum Against the US Dollar: The Euro ended flat against the US dollar, closing at 1.0469. The pair attempted to extend its rebound from last week’s lows but struggled to break through the key 1.0500 level. Despite recent upside movement, EUR/USD remains below the 200-day SMA at 1.0737, reinforcing a broader bearish outlook. The 50-day SMA at 1.0388 has provided strong support in recent sessions, and a sustained move above 1.0500 could open the door for a retest of the 100-day SMA at 1.0547. However, any renewed dollar strength could push the pair back towards 1.0420, with a break below 1.0380 potentially triggering further losses.
  • British Pound Holds Above Key Support, Faces Resistance: GBP/USD ended Monday’s session slightly lower, dipping 0.05% to close at 1.2624. The pair briefly tested the 1.2690 resistance level earlier in the day but failed to maintain momentum, signalling continued consolidation. Despite the pullback, GBP/USD remains above its 50-day SMA at 1.2461, keeping the short-term recovery trend intact. However, resistance at the 200-day SMA near 1.2789 continues to limit further gains. A move above 1.2700 could pave the way for a rally towards 1.2800, while a failure to hold above 1.2600 may lead to a retest of the 1.2500 support zone.
  • US Dollar Extends Gains Against Canadian Dollar: The US dollar continued to strengthen against the Canadian dollar, with USD/CAD rising 0.33% to close at 1.4262. The pair has been trending higher since bouncing from 1.4100 last week, now approaching key resistance at 1.4300. USD/CAD remains well above its 50-day SMA at 1.4139 and is closing in on the 100-day SMA at 1.4339, reinforcing the bullish outlook. A decisive break above 1.4300 could set the stage for a move toward the 1.4500 level. On the downside, immediate support is seen at 1.4200, with further losses likely to test the 1.4150 area if sentiment shifts.
  • Japanese Yen Weakens as US Dollar Recovers: USD/JPY gained 0.33% on Monday, climbing to 149.72 as the US dollar rebounded from recent losses. The pair has faced significant selling pressure in recent sessions, dropping below the 50-day SMA at 153.41 and testing support near 149.00. The inability to firmly reclaim the 150.00 level suggests that downward pressure remains, with safe-haven demand for the yen still in play. If USD/JPY fails to hold above 149.50, a further decline toward 148.50 could follow. However, if buyers regain control and push the pair back above 150.50, a recovery toward 152.00 may be on the horizon.
  • Gold Extends Gains as Investors Seek Safe-Haven Assets: Gold prices climbed 0.55% on Monday to settle at $2,951 per ounce, continuing their strong upward momentum. The metal has gained over $100 in the past two weeks, driven by increased demand for safe-haven assets amid economic uncertainty. Gold remains well above its 50-day SMA at $2,748, reinforcing its bullish outlook. The next major resistance level is near $2,960, and a break above this level could push prices toward the psychological $3,000 mark. On the downside, support is seen at $2,920, with additional buying interest expected around $2,900. A move below that level could trigger a short-term consolidation phase before the next major trend direction emerges.

Market Movers:

  • Palantir Plunges as Tech Weakness Continues: Shares of Palantir (PLTR) tumbled 10.5% on Monday, marking the fourth consecutive session of declines. The stock has now fallen more than 24% over the past five trading sessions.
  • Berkshire Hathaway Jumps on Strong Q4 Earnings: Berkshire Hathaway (BRK.B) surged more than 4% after reporting a significant increase in Q4 earnings, driven by a strong performance in its insurance underwriting business. 
  • Nike Soars After Analyst Upgrade: Nike (NKE) climbed more than 5% after upgraded to a “buy” rating, citing expectations for a strong recovery in the coming quarters. 
  • Alibaba Drops Over 10%, Reversing Last Week’s Rally: Alibaba (BABA) plummeted more than 10% on Monday, erasing part of last week’s 15.3% surge. The sharp decline came despite an analyst upgrade from Morgan Stanley, which raised its rating on the stock to “overweight” from “equal weight,” citing accelerating growth in Alibaba’s cloud division. 
  • Just Eat Soars on Takeover Deal: Shares of Just Eat Takeaway skyrocketed 54% after tech investor Prosus announced plans to acquire the company in a $4.3 billion deal. The news sent Just Eat to the top of the Stoxx 600 index, while Prosus shares tumbled 8.8%, making it the worst performer of the day in European markets.

As markets struggled to regain footing after last week’s sharp losses, the S&P 500 and Nasdaq closed lower on Monday, with major technology stocks continuing to face selling pressure. Nvidia’s 3% decline ahead of its earnings report weighed on sentiment, while Palantir tumbled over 10%, dragging the Nasdaq further into negative territory for the year. Treasury yields edged lower as investors braced for a packed week of economic data, including the Fed’s preferred inflation gauge on Friday. In Europe, markets ended mixed as Germany’s DAX held onto post-election gains, while Just Eat soared 54% following a takeover announcement. Meanwhile, oil prices rebounded after the US imposed fresh sanctions on Iran’s petroleum sector, helping Brent crude recover to $74.80 per barrel. With uncertainty surrounding Federal Reserve policy, trade tensions, and corporate earnings, volatility is likely to remain elevated in the days ahead as investors closely monitor key economic indicators and central bank signals.