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Investors set aside Trump’s new tariff threats (0:35), Fed signals moderate pace in cutting rates (1:30). No exemption for crude oil imports (4:00). U.S. oil producers won’t ‘drill, baby, drill’ (5:50). Bitcoin pulls back (7:05). Flurry of retail earnings illustrate challenges (8:40).
Transcript
Major U.S. stock averages finished higher Tuesday, with investors setting aside President-elect Donald Trump’s new tariff threats, while the Federal Reserve signaled a moderate pace in cutting interest rates.
Nine of the 11 sectors on the S&P 500 (SP500) rose, topped by the defensive Utilities group and Communications Services. Materials lagged all other sectors.
Investors were considering the macro backdrop for stocks, with updates from Trump late Monday and the Federal Reserve on Tuesday. Tuesday’s gain came after Wall Street’s positive finish on Monday as investors appeared to embrace President-elect Trump’s nomination of a hedge fund veteran as Treasury Secretary.
“The markets have digested the election results and incoming cabinet nominations, which have been mostly bullish for stocks. Bonds could move higher over the coming weeks as Scott Bessent’s nomination for Treasury Secretary has been mostly warmly received as stable and competent by the market,” Andrew Hecht, investing group leader of Hecht Commodity Report, told Seeking Alpha.
The Fed on Tuesday struck a cautious tone in its November meeting minutes, with policymakers discussing the possibility of pausing rate cuts if inflation remains too elevated. Members collectively said it would “likely be appropriate to move gradually” toward a more neutral policy stance. The Fed has cut rates by 75 basis points this year to 4.5%-4.75%.
A potential source of inflationary risk lies in Trump’s plans to levy 25% tariffs on goods coming from Mexico and Canada. He’ll also look to charge an additional 10% tax on products from China, which would be above any additional tariffs.
“Tariff threats may trigger near-term market volatility, but the fundamental backdrop remains supportive,” Solita Marcelli, chief investment officer for Americas coverage at UBS Global Wealth Management, in a note Tuesday. “Our base case for the year ahead is for still-solid US growth supported by deregulation and improved business confidence, which can more than offset the impact of selective tariffs,” she said.
The tariff proposal triggered an “immediate market reaction,” in currencies, with the Canadian dollar (CAD:USD) hitting a more than four-year low against the U.S. dollar, and Mexican peso (MXN:USD) sliding down more than 2% against the greenback, Deutsche Bank’s Jim Reid said.
Areas like the auto sector, which has highly integrated supply chains across the Mexico-US and Canada-U.S. borders, are very vulnerable to tariffs, UBS’ Paul Donovan said. Trump on his Truth Social platform said with the tariffs, he’s aiming to force the countries to crack down on illegal immigration and drug smuggling.
Among Tuesday’s stock movers, NRG Energy (NRG) +10% as Jefferies raised its view and price target on the energy supplier to Buy from Hold, with a $113 price target.
Amgen (AMGN) -4.8% as Wall Street analysts want more details about its MariTide weight loss drug alongside data showing it produced ~20% weight loss, on average, for certain patients.
In economic updates Tuesday, home prices, on an unadjusted basis, increased 4.6% in September, according to the S&P CoreLogic Case-Shiller Home Price Index Composite for 20 cities. Also, the FHFA House Price Index gained 0.7% M/M in September.
The November U.S. Consumer Confidence data came in at 111.7 compared with the 112.3 consensus and 109.6 (revised from 108.7) levels.
Crude oil futures gave up early gains to settle lower Tuesday, weighed by an easing global risk premium and a report that OPEC is in discussions to postpone its scheduled production increase in January.
Israel approved a ceasefire with Hezbollah in Lebanon; initial reports that an agreement was likely helped sink crude prices in the previous session – even though the net effect on global oil supply from the conflict was and remains zero.
But a deal in the Middle East “could also help reduce the tensions between Israel and Iran and lower the regional supply risks significantly for the oil market in immediate terms,” ING analysts wrote.
Meanwhile, investors await OPEC+’s next move this coming weekend, with most expecting the group to further delay its production hike that was due to start in January, as a slowdown in Chinese and global demand, as well as rising non-OPEC output, appear to have thwarted that plan.
Reuters reported OPEC+ is discussing another delay, ahead of the December 1 meeting to decide policy for the early months of 2025. Front-month Nymex crude (CL1:COM) for January delivery closed -0.2% to $68.77/bbl, and front-month January Brent (CO1:COM) finished -0.3% to $72.81/bbl.
U.S. natural gas settled at a new 52-week high, with the December front-month contract (NG1:COM) closing +1.8% to $3.431/MMBtu.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)
Crude oil imports from Canada and Mexico would not be exempt from President-elect Trump’s proposed tariff plan, and would be subject to 25% import duties, Reuters reported.
Canada’s oil industry warned that tariffs would result in “higher gasoline and energy costs to American consumers while threatening North American energy security.”
The U.S. has long imported millions of barrels of crude oil from Canada every day, reaching a record 4.3M bbl/day in July, according to the U.S. Energy Information Administration.
Crude oil imports from Mexico have dropped steadily since peaking in 2006, and the U.S. imported just 733K bbl/day of crude in 2023.
U.S. oil and gas producers are not likely to raise production significantly during the coming Trump administration because they will remain focused on capital discipline, a senior Exxon Mobil (NYSE:XOM) executive said Tuesday.
“We’re not going to see anybody in ‘drill, baby, drill’ mode,” Liam Mallon, head of Exxon’s (NYSE:XOM) upstream division, told the Energy Intelligence Forum conference in London. “A radical change [in production] is unlikely because the vast majority, if not everybody, is focused on the economics of what they’re doing.”
Mallon also reinforced recent remarks by Exxon (XOM) CEO Darren Woods supporting the 2015 Paris climate agreement and the U.S. Inflation Reduction Act, whose incentives such as tax credits for capturing carbon, producing hydrogen and making sustainable aviation fuel, are popular with oil companies.
Trump has pledged for months on the campaign trail that he would expand domestic oil and gas drilling in his new administration, turning away from renewable alternatives that had been prioritized under President Biden.
The promise to increase output comes as the U.S. is already the leading producer of oil worldwide, producing more than 13.4M bbl/day, and with crude benchmark prices only in the high $60s and low $70s, boosting output likely would depress prices further.
Bitcoin (BTC-USD) pulled back from its historic high of $99.8K touched on Friday, drifting down 3.0% to $91.9K Tuesday afternoon, triggering a slide in crypto-related stocks.
Other tokens also traded lower. Ethereum (ETH-USD) -4.8% to $3.32K, Solana (SOL-USD) -4.5%, XRP (XRP-USD) -5.9%, and Dogecoin (DOGE-USD) -5.6%.
Even with recent profit-taking, Bitcoin (BTC-USD) may still hit $100K by the end of the year, said H.C. Wainwright analyst Mike Colonnese in a note to clients. With the pro-crypto sentiment surrounding Donald Trump’s election win, the analyst observed more chatter about corporations and governments adopting bitcoin (BTC-USD) as a treasury reserve asset.
“We believe institutional and government adoption of BTC will be a major theme for investors to keep an eye on in 2025, which we expect will be catalyzed by a more favorable political and regulatory landscape for the industry under the new administration in the US.,” Colonnese said.
Precious metals have been under pressure since Trump’s election from a stronger dollar and elevated Treasury yields, but continued increases in global public debt should support prices, analysts say.
Trump’s proposed tariffs may heighten market uncertainty and drive increased demand for safe-haven assets such as gold as protection against market risks and economic instability, FlowCommunity’s Ruben Ferreira writes.
Investors also are focused on the U.S. Federal Reserve’s November meeting minutes, with sentiment divided on the likelihood of a December interest rate cut, Ferreira says, adding that a rate cut would further boost the appeal of non-interest bearing bullion.
Just in time for the official start of the holiday shopping season, a flurry of earnings from the retail sector this week illustrated the persistently challenging environment for retailers as higher prices and limited discretionary income forced shoppers to make more discerning choices with their disposable income.
Some names stood out for consistent outperformance thanks to brand strength and exceptional merchandise (Abercrombie & Fitch), while others struggled against its waning relevance with consumers (Kohl’s).
Other headlines of note on Seeking Alpha:
4 Barrick Gold employees arrested in Mali; company says seeking settlement
Walmart rolls back DEI efforts and policies
Initial hearing on marijuana rescheduling set for Dec. 2
Lockheed Martin bags $129M U.S. Army contract
Raytheon secures $590M U.S. Navy contract
Acadia signs licensing deal for essential tremor drug candidate
Rolls-Royce awarded $695M U.S. Navy contract
On the economic calendar today, at 8:30 AM today we have a slew of releases: Durable Goods Order, GDP, International Trade in Goods (Advance), Corporate Profits, and Jobless Claims, where the call this week is 217,000 as forecasters look for claims to move back toward their four-week moving average of 218,000 from a surprisingly low 213,000 last week.
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
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