Market Analysis: US stocks struggle ahead of US CPI data

US equities remain in a cautious mood as investors weigh the impact of ongoing tariff announcements from the Trump administration. Despite delays in implementing tariffs on some trading partners following diplomatic discussions, President Trump confirmed on Monday that a 25% tariff on all steel and aluminium imports will take effect on March 12. This move places additional strain on major trading partners like Canada and Mexico, with further tariff announcements expected this week, further dampening market sentiment.

Meanwhile, Fed Chairman Powell’s two-day testimony to Congress was underway on Tuesday, reinforcing the central bank’s stance on maintaining interest rates at their current levels. His statement, indicating that the Fed is in no rush to cut rates, aligned with market expectations, as economic data continues to signal resilience in the US economy. However, Powell’s reiteration of a “higher for longer” rate policy has strengthened bond yields, limiting upside potential for equities.

Inflation Data in Focus

Attention now turns to the upcoming US Consumer Price Index (CPI) report set for release on Wednesday. Economists forecast headline inflation to rise by 0.3% month-over-month and 2.9% year-over-year, remaining unchanged from the previous reading. Meanwhile, core inflation is expected to tick up to 0.3% in January from 0.2%, though its annualized growth rate is projected to decline from 3.2% to 3.1%. Last month, a lower-than-expected core CPI reading triggered a bullish reversal in equities. While CPI is not the Federal Reserve’s primary inflation gauge, markets will closely scrutinize the report for potential shifts in monetary policy expectations.

Technical Outlook: S&P 500 and Nasdaq

On the charts, both the S&P 500 and Nasdaq have lost momentum in recent days as uncertainty takes hold. The bullish rally from last week has stalled, with both indices approaching their respective descending trendlines from recent highs. The formation of lower highs, coupled with declining Relative Strength Index (RSI) readings, suggests waning momentum. In the absence of a strong bullish catalyst, equities may face a deeper pullback in the near term.

Nasdaq daily chart

Past performance is not a reliable indicator of future results.

S&P 500 daily chart

Past performance is not a reliable indicator of future results.