Trade Tensions Rise, Fed Policy in Focus

Image Source : Krish Capital Pty Ltd

Index Update:  President Trump confirmed that the new tariffs on 14 countries, including Japan and South Korea, would proceed without changes and announced plans for a 50% tariff on copper imports, with more sector-specific duties expected. He also proposed tariffs of up to 200% on pharmaceutical imports, though their implementation would be delayed. In the latest session, the Dow and S&P 500 declined modestly, while the Nasdaq saw a slight gain. Sector-wise, consumer staples, utilities, and financials lagged, while energy, materials, and healthcare outperformed.

Market Movers:  On Tuesday, the top gainers were ProKidney Corp (+515.0%), followed by ENDRA Life Sciences Inc (+140.12%). On the contrary Park Ha Biological Technology Co (-92.71%) and Banzai International, Inc (- 92.00%) declined the most the same day.

Commodities Update:  Crude oil prices climbed to over two-week highs, with WTI nearing $69 and Brent surpassing $70 per barrel, driven by rising supply concerns and a downward revision in U.S. production forecasts. Renewed Houthi attacks on Red Sea shipping threatened key crude transit routes, while the EIA cut its 2025 output outlook due to weaker prices and reduced drilling activity. However, gains were capped by a surprise build in U.S. crude inventories and escalating trade tensions after President Trump ruled out extending the August 1 tariff deadline.

Gold prices extended losses, slipping below $3,290 per ounce as investor sentiment turned cautious following a less dovish tone from the Federal Reserve. Strong U.S. jobs data lowered expectations for a July rate cut, while new tariffs—including steep duties on copper, pharmaceuticals, and goods from BRICS countries—added to inflation concerns, limiting the scope for further easing. Traders now look to the upcoming FOMC minutes for further policy cues.

Macro Update:  U.S. mortgage rates fell to a three-month low of 6.77% amid declining Treasury yields, as markets increasingly expect Fed rate cuts later this year. In response, mortgage application volume surged 9.4% in early July—its largest weekly gain in a month and third consecutive increase. Refinance applications rose 9% week-over-week and 56% year-over-year, while home purchase applications increased 9% on the week and 25% annually.

Bonds Commentary:  U.S. 10-year Treasury yields remained above 4.4% after a five-day rise, as investors reacted to President Trump's confirmation that new tariffs on 14 countries will take effect August 1, with additional duties on copper and pharmaceuticals planned. Markets now await the FOMC minutes for further policy insights.

Dollar Commentary:  The U.S. dollar index rose above 97.5, supported by investor reaction to President Trump's tariff announcements, which include duties on 14 countries, a 50% copper import tariff, and potential 200% tariffs on pharmaceuticals. The dollar strengthened notably against the yen amid trade pressure on Japan. Markets now await the FOMC minutes for further policy direction.

Futures Update:  U.S. stock index futures posted modest gains in quiet trading, as investors remained cautious amid renewed trade tariff threats from President Donald Trump. Despite a wave of trade-related developments, Wall Street ended the previous session with mixed performance and steady overall sentiment.

Following the sharp pullback observed on Monday, stocks exhibited a lack of clear direction throughout Thursday’s trading session. The S&P 500 declined by 4.49 points, or 0.07%, closing at 6,225.51. From a technical analysis standpoint, the index remains above important resistance levels, which may signal the potential for further upward movement in the near term. Additionally, the 14-period RSI is trending upward, indicating sustained bullish momentum unless a divergence occurs. Key support levels are identified around 6,100, with resistance expected near 6,380.