Markets live updates: Wall Street closes in the red after volatile trade, ASX may slip

Let’s check out what’s been happening overnight, with a summary of the biggest economy in the world: the US.

Some trade policy relief and strong bank earnings were not enough to keep Wall Street from pushing US stocks lower slightly on Tuesday, although U.S. government bonds and the dollar regained some ground after sharp declines last week.

U.S. President Donald Trump on Monday said he was considering a modification to the 25% tariffs imposed on foreign auto and auto parts imports from Mexico, Canada and other places.

That followed the move late on Friday to exempt smartphones, computers and some other electronics from Trump’s “reciprocal” tariffs.

The main US stock indexes ticked lower on Tuesday, even as Bank of America, Citigroup and Wells Fargo gained after the trio of banking giants posted strong profits for the first quarter.

“The market is eerily calm,” investment strategist Louis Navellier wrote in a note on Tuesday. “It’s a bit unnerving after the rollercoaster ride we’ve been on since the tariff tantrum began.”

Analysts remained cautious, however, as uncertainty over Trump’s trade policies, and his constant back-and-forth on tariffs, continued to cast a cloud over markets and the global economic outlook.

Darrell Cronk, president of the Wells Fargo Investment Institute, wrote in a note on Tuesday that the “final tariff menu remains unsettled” and will decide if there is a recession or not.

“We should expect volatility to remain high, but last week proved the power of markets to push the administration not to break the financial system,” Cronk added. “Hence, we should have a floor for equities and a ceiling for rates.”

Bond market steadies

U.S. Treasuries added to Monday’s gains on Tuesday after a manic selloff last week that led to the largest weekly increase in borrowing costs in decades. Bond yields move inversely to prices.

The benchmark 10-year yield fell about 3 basis points to 4.333%, having fallen nearly 13 basis points in the previous session.

Federal Reserve Governor Christopher Waller said on Monday that the Trump administration’s tariff policies were a major shock to the U.S. economy that could lead the Fed to cut rates to head off recession even if inflation remained high. Atlanta Fed Bank President Raphael Bostic, meanwhile, suggested the US central bank should stay on hold until there is more clarity.

Markets are now pricing in about 85 bps worth of monetary policy easing by the end of the year, with most expecting the Fed to hold rates next month.

“The U.S. exceptionalism narrative that had previously underpinned the surge in U.S. equity markets over the past couple of years, and boosted the dollar, has lost much of its shine,” said Jonas Goltermann, deputy chief markets economist at Capital Economics.

– Reuters