Major U.S. stock indices declined on Wednesday. The U.S. Supreme Court did not issue a ruling on the legality of former President Trump's tariff policies, meaning the ultimate fate of this signature economic policy will remain unknown until at least next week. The court has not announced the timing for its next opinion release, but it is likely scheduled for next Tuesday or Wednesday. During oral arguments on November 5th, the debate revealed the court's skepticism regarding whether Trump had the authority to impose tariffs under a 1977 law. An adverse ruling for Trump could potentially lead to refunds exceeding $130 billion.
In U.S. markets, the Dow Jones Industrial Average fell by 42.36 points, or 0.09%, to close at 49,149.63. The Nasdaq Composite dropped 238.12 points, or 1%, ending at 23,471.75. The S&P 500 index declined by 37.14 points, or 0.53%, settling at 6,926.6. Broadcom (AVGO.US) fell 4%, while Intel (INTC.US) gained 3%. The Nasdaq Golden Dragon China Index closed down 0.23%, with Alibaba (BABA.US) rising 1.7% and Trip.com Group Limited (TCOM.US) plunging 17%.
In European markets, Germany's DAX 30 index fell by 133.91 points, or 0.53%, to 25,277.53. The UK's FTSE 100 index rose by 34.81 points, or 0.34%, to 10,172.16. France's CAC 40 index declined by 16.23 points, or 0.19%, to 8,330.97. The Euro Stoxx 50 index dropped 24.58 points, or 0.41%, to 6,005.25. Spain's IBEX 35 index gained 13.23 points, or 0.07%, to 17,685.53. Italy's FTSE MIB index increased by 91.40 points, or 0.20%, to 45,616.50.
In the cryptocurrency space, Bitcoin broke through the $97,000 mark, rising over 2% for the day. Ethereum briefly climbed above $3,400.
Metal prices extended their astonishing rally this year, with gold, silver, copper, and tin all reaching record highs as investors flocked to these commodities as alternatives to more traditional assets. Spot gold closed up 0.86% at $4,626.02 per ounce, while spot silver broke through $93.
Crude oil prices fell after Wednesday's market close, erasing gains from the regular trading session. This followed comments from former U.S. President Trump stating he had been informed that Iran would stop killing protesters, suggesting he might hold off on threatened military action against Iran's crackdown on widespread domestic demonstrations. February WTI crude fell 1.6% to $60.16 per barrel, after settling the regular session at $62.02. March Brent crude declined 1.5% to $64.48 per barrel, following a regular session settlement of $66.52.
The Federal Reserve released its Beige Book on economic conditions. The report indicated that economic activity increased at a slight to modest pace in eight of the twelve Federal Reserve Districts, three districts reported no change, and one reported a modest decline. This represents an improvement over the past three reporting cycles, where most districts reported little to no change in economic activity. The outlook for future activity was somewhat optimistic, with most districts expecting slight to modest growth in the coming months. The Beige Book also showed that most banks reported slight to modest increases in consumer spending, largely attributed to the holiday shopping season. Recent employment conditions were largely unchanged, with eight of twelve districts reporting no change in hiring activity. Prices increased at a modest pace in the vast majority of districts, with only two reporting slight increases. Cost pressures related to tariffs were a widespread concern across all districts.
Former President Trump stated that following a tariff investigation, a 25% tariff would be imposed on chips imported into the U.S. that are not used for domestic artificial intelligence industries. These tariffs target chips that transit through the U.S. and are subsequently used in products like data center servers before being exported to other countries. "We will get 25% on the sale of those chips," Trump said on Wednesday, estimating that billions of dollars in revenue would be generated. Last year, Trump had suggested that companies increasing investment in the U.S. might be exempt from chip tariffs, but he did not mention this potential exemption on Wednesday.
Rising risk-off sentiment pushed U.S. Treasury yields lower, with the 30-year bond yield hitting a new low for the year. As demand for safe-haven assets increased and supply factors came into play, U.S. Treasury prices rose, driving the 30-year bond yield down to its lowest level this year. Shortly before noon in New York, yields across maturities were down by at least 2 basis points, with some falling as much as 4 basis points. The 30-year yield fell below 4.80% for the first time this year and dropped below its 200-day moving average, marking the first time since early December that it was on track to close below that level. Catalysts for this rally included declines in major U.S. stock indices, additional safe-haven demand spurred by expectations of U.S. military action against Iran, and the Supreme Court's delay in ruling on tariffs, which improved the U.S. fiscal outlook. Supply considerations also played a role, following strong demand at Treasury auctions over the previous two days and a routine Treasury buyback operation targeting bonds maturing in 20 to 30 years scheduled for 2 p.m. New York time on Wednesday. Additionally, U.S. Treasuries were supported by gains in UK gilts, with the 10-year UK gilt yield falling to 4.35%, its lowest closing level in over a year.
Iranian Foreign Minister Hossein Amirabdollahian stated that the situation in the country is under control and has returned to calm. In an interview on January 14th Eastern Time, Amirabdollahian also claimed that "certain forces" attempted to cause more casualties during the unrest, calling it an Israeli "conspiracy." Recent protests and associated riots in various parts of Iran have resulted in casualties. In recent days, former U.S. President Trump has repeatedly threatened military intervention in Iran's situation.
xAI, an AI startup under Tesla (TSLA.US) CEO Elon Musk's social media platform X, is facing an investigation by the California Attorney General's office. This follows allegations that the company's Grok chatbot was used, without permission, to generate thousands of inappropriate images involving women and children. California Attorney General Rob Bonta announced the investigation on Wednesday. In a statement, Bonta urged "xAI to take immediate action to ensure such incidents do not happen again." Musk has faced criticism from governments and regulators worldwide concerning Grok's image-generation capabilities. Thus far, Musk has defended Grok, arguing that the problem stems from user misuse of the tool rather than the technology itself. In a post on X on Wednesday, Musk stated, "It is obvious that Grok does not generate images spontaneously; it only generates them based on user requests. As a matter of operational principle, when asked to generate images, it refuses to produce any illegal content."
KeyBanc initiated coverage on Microsoft with an "Overweight" rating and a $630 price target.