The markets went wild on Tuesday, with stocks and cryptocurrencies bouncing back as the dollar took a hit. A surprise cooling in wholesale inflation and whispers about Donald Trump’s plan for gradual tariff hikes shook up trading floors. Wall Street held its breath, waiting for the next shoe to drop with Wednesday’s Consumer Price Index (CPI) report . Meanwhile, crypto saw an opportunity to shine as traditional markets faltered. Bitcoin quickly reclaimed $97,000. On the stock side, the S&P 500 dropped 0.4%, the Nasdaq 100 slid 0.4%, and the Dow Jones fell 0.2%. Even the so-called “Magnificent Seven” tech giants weren’t spared, slipping 0.8%. The Russell 2000, however, showed a pulse, gaining 0.3%. Wall Street prepares for CPI fallout Wholesale inflation in December cooled unexpectedly, mostly because food prices dropped, and service costs stayed flat. But there’s a catch. Some of these factors impact the Fed’s favored inflation gauge—personal consumption expenditures (PCE). For those watching the CPI like hawks, options traders are bracing for the S&P 500’s busiest day since March 2023. The index could move 1% in either direction, based on how much traders are paying for at-the-money puts and calls. But stocks weren’t just reacting to inflation chatter. Boeing fell 2.9% after reporting it delivered the fewest jets last year since the pandemic. Eli Lilly took an 8% hit due to disappointing sales numbers. On the flip side, KB Home’s strong earnings gave homebuilder stocks a much-needed boost. The bond market didn’t sit still either. The yield on 10-year Treasuries ticked up to 4.79%. And then there was the dollar, which dipped after a Bloomberg report revealed that Trump’s incoming economic team is toying with the idea of tariff hikes—strategically timed to avoid a new inflation spike. Trump’s tariff game Trump’s economic team is reportedly discussing a phased approach to tariffs, with increases of 2% to 5% per month. The plan, which would lean on powers under the International Emergency Economic Powers Act, hasn’t landed on Trump’s desk yet. Scott Bessent, the nominee for Treasury secretary, Kevin Hassett, who’s set to lead the National Economic Council, and Stephen Miran, slated to head the Council of Economic Advisers, are working on the details. While the phased tariffs want to avoid an inflation surge, they’ve already rattled global markets. During his campaign, Trump floated the idea of universal tariffs of 10% to 20% on all imports, with rates on Chinese goods potentially hitting 60% or more. And let’s not forget Trump’s outright denial of a measured tariff rollout, calling one report “false.” China’s yuan gained 0.1% in offshore trading after the tariff rumors hit. The Australian and New Zealand dollars, sensitive to China’s economy, also ticked up by 0.3%. But analysts warn this could be temporary, as Beijing might eventually allow the yuan to weaken further if Trump slaps higher tariffs on Chinese exports. On Wall Street, banks like JPMorgan Chase and Wells Fargo are gearing up for earnings season. With results set to drop on Wednesday, analysts are eyeing net interest income—basically the profit banks make on loans versus deposits. Inflation, bonds, and global effects While December inflation data showed some relief, the Fed isn’t out of the woods. Underlying inflation likely only cooled slightly in late 2024, thanks to a robust labor market and a strong economy. This has the Fed treading cautiously when it comes to interest rate cuts. Back in equities, the S&P 500 dropped below its Nov. 5 level—right before Trump won the election—before rebounding later. Investors are dumping Treasuries as fears of stubborn inflation grow, partially fueled by tariff talk. And then there’s the International Monetary Fund. Kristalina Georgieva, its managing director, warned that Trump’s tariff threats are already driving up long-term borrowing costs around the world. “These uncertainties are creating headwinds for the global economy,” she said. For now, investors are stuck between guessing games about Trump’s next move and waiting for the Fed to give clearer signals. The market is tense, the dollar’s down, and the only sure thing is uncertainty. Land a High-Paying Web3 Job in 90 Days: The Ultimate Roadmap
