How will new tariffs and inflation data impact Wall Street this week?

Mixed market reactions to tariff news

United States (US) stock markets ended a turbulent week with mixed results. Investors reacted to tariff news at both the start and end of the week, which framed a surge in inflation expectations and a mixed jobs report.

Over the week, the S&P 500 decreased by 0.24%, the Nasdaq 100 inched up by 0.06%, and the Dow Jones fell by 241 points.

Fresh tariff threats from President Trump

This week has started similarly to last week, with fresh tariff headlines indicating that President Trump is set to announce a 25% tariff on steel and aluminium today. Trump is also expected to impose reciprocal tariffs on Tuesday and Wednesday, taking effect almost immediately, which will match the taxes and duties imposed by other countries.

The new tariffs are expected to affect 'everyone,' with the European Union (EU), China, India, and Brazil most likely to be in the firing line.

Economic data paints a mixed picture

Adding to the chaotic start, Friday night's economic data was mixed. The highly anticipated US non-farm payrolls report showed an increase of just 143,000 jobs in January, below the expected 175,000. The Bureau of Labor Statistics (BLS) noted that the weather and wildfires 'had no discernible effect on national payroll employment, hours, and earnings.'

Despite the headline miss, other elements of the report pointed to a strong labour market, with upward revisions of 100,000 over the past two months and an unexpected fall in the unemployment rate to 4.0% from 4.1%.

Meanwhile, the University of Michigan’s consumer sentiment report revealed that one-year inflation expectations rose to 4.3% from 3.3%, the highest since November 2023.

Upcoming focus: CPI report and Fed testimony

The focus this week will be on the consumer price index (CPI) report for January and Federal Reserve (Fed) Chair Jerome Powell’s testimony before Congress. The fourth quarter (Q4) 2024 earnings season continues, with reports expected from companies such as Super Micro Computer, DoorDash, Lyft, Robinhood, Coinbase, and Airbnb .

The interest rates market ended last week pricing in 39 basis points (bp) of Fed rate cuts for 2025, down from 49 bp on Thursday night.

CPI

Date: Thursday, 13 February at 12.30am AEDT

At the recent Federal Open Market Committee (FOMC) meeting, the Fed kept the Fed Funds rate on hold at 4.25% - 4.50%, as widely expected. Fed Chair Jerome Powell offered a more optimistic view on the labour market while dropping a key reference from the December statement that inflation 'has made progress toward' the Fed’s 2% inflation goal.

In December, the US headline CPI increased by 0.4% month-on-month (MoM), the most since March which saw the annual rate rise to 2.9% year-on-year (YoY) from 2.7% prior. Core CPI increased by 0.2% MoM, which saw the annual rate of core inflation ease to 3.2% from 3.3%.

Looking ahead, both headline and core inflation are expected to rise by 0.3% MoM in January, supporting the expectation that the Fed will keep rates on hold until the middle of this year.

Nasdaq 100 technical analysis

The Nasdaq 100 has been trading sideways for seven weeks as part of a correction from the 22,133-record high of mid-December. The correction has largely unfolded within a 1000-point range between 22,000 and 21,000.

A sustained break above resistance at 22,000 - 22,200 would confirm the correction is complete and the uptrend has resumed, targeting a move to 23,000.

Conversely, while the Nasdaq remains below the 22,000 - 22,200 resistance level it leaves the correction open to another leg lower towards 20,500 with scope into the 20,000 - 19,600 critical support region.

Nasdaq 100 daily chart

S&P 500 technical analysis

In late January, the S&P 500 made a fresh record high of 6128, notable because the Nasdaq 100 and the Dow Jones failed to do so, leaving signs of bearish divergence amongst the three key US indices.

Since the January high, the S&P 500 has been tracing out a correction largely between 6100 and 5900.

A sustained break above resistance at 6100 - 6130 would confirm the correction is complete and the uptrend has resumed, targeting a move to 6350.

Conversely, while the S&P 500 remains below the 6100 - 6130 resistance zone it leaves the correction open to another leg lower towards uptrend support at 5800 - 5773 coming from the mid-January low and uptrend support from the October 2023 4103 low.

If the S&P 500 saw a sustained break of the 5800 - 5770 support zone, it would warn a deeper decline is underway towards the 200-day moving average at 5655.

S&P 500 daily chart

• _{Source: TradingView. The figures stated are as of 10 February 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}