Morning in New York: geopolitical escalation in focus

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The aggravation of foreign trade and geopolitical tensions will be the key factor determining the mood of the investment community during the upcoming session. The U.S. market, which was closed the day before, January 19, due to a public holiday, will have to play back the statement of U.S. President Donald Trump about his intention to impose a 10% duty on goods from eight NATO countries, including the UK, Germany and France, from February 1, and raise this tariff to 25% from June 1, if no agreement is reached on the purchase of Greenland. This news naturally provoked a sell-off on European platforms and caused a decline in futures on U.S. indices by more than 1%. Aggressive rhetoric of the head of the White House was reinforced by his threats to impose a duty on 200% of wine from France in response to the refusal of its President Emmanuel Macron to join Trump's "Peace Council". In addition, Russian President Vladimir Putin was invited to join the body.

All this, coupled with the instability in Venezuela, supports the demand for protective assets, which stimulates gold and silver to reach new all-time highs. Additional uncertainty is created by expectations of a Supreme Court decision on import tariffs set by President Trump last year.

This Tuesday, January 20, the statistics of business activity in the non-manufacturing sector from FRB Philadelphia will be released. Given that the previous value of the index amounted to -16.8 points, the market will closely monitor whether the negative dynamics will continue, which may increase concerns about the state of the regional economy.

Prior to the opening of the main session , U.S. Bancorp (USB), D.R. Horton (DHI), 3M (MMM), Fastenal (FAST), Fifth Third Bancorp (FITB ) and KeyCorp (KEY). At the postmarket , Netflix (NFLX), United Airlines (UAL), Interactive Brokers (IBKR), Zions Bancorporation (ZION) and F.N.B. Corporation (FNB).

We assess the balance of risks for the upcoming trades as negative with increased volatility. We focus on the S&P 500 fluctuations in the range of 6800-6940 points (from -2% to 0% of the previous session's closing level).

- Quotes of BHP (BHP) fell more than 1% despite successful results and an improvement in its own copper production forecast for fiscal 2026 from 1.8-2 million tons to 1.9-2 million. Investors fear that a new round of trade wars will weaken global demand for industrial metals.

- Tesla (TSLA) shares are down nearly 3% after Elon Musk announced the restart of his Dojo3 project, which involves building its own supercomputer, developing chips for AI training and expanding its workforce.

- Micron (MU) is losing about 1% in the Jan. 20 premarket on news of a deal to buy Powerchip's 300,000-square-foot P5 fab in Taiwan for $1.8 billion in cash. The site will produce DRAM memory chips. The deal is scheduled to close in the second quarter.

January 16 trading on the U.S. stock exchanges ended near zero marks. The S&P 500 lost a symbolic 0.06%, the Nasdaq 100 declined by an insignificant 0.07%, the Dow Jones fell by 0.17%, while the Russell 2000 rose by 0.12%, continuing to outperform the broad market.

The Magnificent Seven stocks traded mixed. The technology sector moved upward due to positive dynamics in the semiconductor segment, which is also confirmed by the divergence between the capitalization-weighted S&P 500 and its equilibrium counterpart (RSP: -0.26%). The real estate sector (XLRE: +1.22%) led the growth. The outsiders were communication service providers (XLC: -0.89%).

Market movements were largely determined by the change in orientation regarding the candidate to replace Jerome Powell as Fed chief. Donald Trump announced his intention to leave Kevin Hassett in the White House, so the market now considers Kevin Warsh, who has a more "hawkish" and independent position, to be the main contender. Against this backdrop, the benchmark for rate cuts this year was revised to the lowest since the December FOMC meeting at 43 bps.

Industrial production growth for December was 0.4% mom after 0.2% and with a consensus of 0.1% mom. Meanwhile, the NAHB housing market index for January disappointed, falling for the first time since August. Details of the report indicated that 40% of builders were forced to cut prices for the third consecutive month.

Michelle Bowman, a member of the Fed's Board of Governors, spoke in favor of continued monetary easing. Other FOMC members who made comments in recent days maintained a more cautious rhetoric.

- AST SpaceMobile (ASTS: +14.3% at the close of trading on January 16) has been awarded a prime contract position in the U.S. Missile Defense Agency's SHIELD IDIQ program. This allows the company to count on participation in tenders for R&D/prototyping and operation of missile defense elements.

- Micron (MU: +7.8% at the close of trading on January 16) board member Mark Liu bought 23,200 shares of the company for about $7.8 million.

- State Street (STT: -6.1% at the close of trading on January 16) reported a better-than-forecast fourth quarter, but with fee income up 8% YoY, its total expenses increased 12% YoY. In addition, the corporation recorded one-time restructuring charges of $226 million.

- Mosaic (MOS: -4.5% at the close of trading on January 16) reported preliminary production statistics for the fourth quarter, which were worse than average market expectations due to weaker demand in North America and unfavorable conditions in Brazil. Phosphate output was about 1.3 million tons and potash output was about 2.2 million tons.

- PNC Financial (PNC: +3.8% at the close of trading on January 16) reported record revenues of $6.1 billion for October-December with deposits of $439.5 billion. Investors were also positive on the announcement of a $0.6-0.7 billion buyback program by the end of the current quarter and news of the closing of the deal with FirstBank on January 5.

This article was AI-translated and verified by a human editor