Dow Tumbles 400 Points; Financial Stocks Drag, Oil Surges
Overview
Wall Street indices closed lower Tuesday, with the Dow Jones Industrial Average shedding 400 points. Financial stocks, led by JPMorgan Chase & Co., bucked inflation-linked market gains, falling on concerns over potential US interest rate caps. Meanwhile, oil prices rallied sharply, and gold and silver found safe-haven demand.
Financial Sector Pressure
The Dow Jones Industrial Average lost 400 points on Tuesday, reversing earlier inflation-driven gains as financial sector stocks faltered. President Donald Trump's comments on potentially capping credit card interest rates at 10% for a year fueled investor apprehension.
JPMorgan Chase & Co. proved a significant drag. Despite reporting earnings that beat expectations, the bank's stock slumped over 4%. This decline was attributed to investment banking revenue missing analyst targets and internal guidance.
The weakness in JPMorgan's results cast a shadow over rivals. Goldman Sachs, set to report Thursday, also saw its shares dip. Credit card giants Visa Inc. and Mastercard Inc. continued their slide, with Visa down more than 4.5% and Mastercard off 3.8% on the day.
Inflation Data & Fed Outlook
Earlier Tuesday, the December Consumer Price Index (CPI) print met expectations. Core CPI showed a more favorable 0.2% monthly and 2.6% annual increase, bettering forecasts.
However, these inflation figures did little to shift the Federal Reserve's expected trajectory. Market probabilities still stand at 98% for no change in interest rates at the January meeting and 75% for a March pause. Bond traders remain divided on the timing of potential rate cuts, with some pricing them in for June, others for later in the year, or even not at all in 2026.
Commodity Surge
In stark contrast to financial sector woes, oil prices surged. President Trump's remarks encouraging protests in Iran, stating "help is on its way," sent Brent crude towards $66 per barrel, a significant recovery from recent multi-year lows.
Heightened geopolitical concerns in Iran prompted investors to seek haven assets. Gold prices held near $4,600 per ounce, while silver prices pushed to new highs above $86 per ounce.
Upcoming Events
Investors also await the US Supreme Court's opinions for the day, which may include rulings on Trump's tariffs. Major banks like Bank of America, Citigroup, and Wells Fargo are scheduled to release their earnings reports today. Macroeconomic data on retail sales, the Producer Price Index, and business inventories are also on the economic calendar.
