The US stock market indices have held steady and are in green for the year. Surprisingly, the Dow Jones Industrial Average, or Dow 30, has outperformed the S&P 500 and Nasdaq Composite indexes thus far in 2025. This could be related to Trump’s tariff policy, which aims to benefit American firms.
Dow 30 companies primarily serve the US economy and include corporations with just US locations. The Dow Jones Industrial Average measures the US economy, its firms, and the country’s purchasing habits.
The market this week is likely to be impacted by the scenario of higher-for-longer interest rates, Trump tariffs, inflationary expectations, and the real US CPI figures that will be released on Wednesday.
This week’s highlight could be the impact of Trump’s tariff announcement on imports to America from other countries.
President Donald Trump declared on Friday that he will soon unveil a plan for reciprocal tariffs on US imports. The remarks were delivered while meeting with Japanese Prime Minister Shigeru Ishiba at the White House.
Reciprocal tariffs will mean the US will tax other countries at the same rate at which other countries tax US imports. A prime example is when the European Union (EU) imposes a 10% tariff on U.S. car imports while the United States, in contrast, only imposes a 2.5% tariff on European cars.
Now, either the EU will have to reduce their tariff on US cars or the US will hot back by raising tariffs to the EU level.
On Sunday Trump announced that he intends to impose fresh 25% tariffs on all steel and aluminum imports entering the country. Any steel coming into the United States is going to have a 25% tariff. Trump has confirmed that the US government would allow investment in Nippon Steel, but won’t allow it to be a majority stake.
US CPI data or the Consumer Price Index (CPI) report to be released on February 12 will be the week’s most closely watched event. The market will primarily focus on core CPI, which excludes volatile food and energy prices, and any deviations from estimates could impact rate cut timing expectations and market volatility.
Inflation looks to re-emerge in the US economy and that could keep the US Fed away from cutting rates in a hurry.
One-year inflation forecasts rose to 4.3%, the highest level since November 2023, according to the University of Michigan’s consumer sentiment report, released last week. Americans now anticipate an inflation rate of 4.3% over the next 12 months, which is a full percentage point higher than they did last month.
Austan Goolsbee, president of the Chicago Federal Reserve, told Yahoo Finance on Friday that although the central bank “may be on hold” for the time being, he still believes that interest rates will decline over the “next 12-18 months.”
The comments about Fed monetary policy came after the release of a new January jobs report. The US economy added 1,43,000 jobs in January, which was a little less than estimated, but the unemployment rate decreased to 4.0%.
Meanwhile, the 10-year Treasury (TNX) yield is at 4.4870% following the sentiment update and monthly jobs report.
Tesla stock could be in focus this week after disappointing China sales numbers. Tesla’s sales in China dipped 11.5% year on year in January, while Chinese competitor BYD’s sales increased by an annualized 47%, according to China Passenger Car Association figures released on Friday.
Oil prices fell for the third week in a row as investors worried about a trade war between the United States and China. Falling oil prices is an indicator of a deterioration in global economic conditions.