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US Markets Edge Higher Amid Tariff Concerns and Fed Rate Path Jitters
US equity markets posted modest gains on Tuesday, February 18, as investors digested the latest US data while looking ahead to Wednesday’s FOMC meeting minutes. The S&P 500 gained 0.24%, while the Nasdaq Composite Index and the Dow advanced by 0.07% and 0.02%, respectively.
Notable movers included Meta (META), which slid by 2.76%, while Amazon.com (AMZN) posted a 0.89 loss amid pre-Fed Minutes profit taking.
In the bond markets, 10-year US Treasury yields rose for the first time in three sessions, tempering demand for risk assets. Rising yields reflected investor concerns about a pickup in inflation and the potential effects of US tariffs on the Fed rate path. Tariffs could increase import costs, fueling inflationary pressures.
Key Focus: US Housing Market
On Wednesday, February 19, the US housing market will face more scrutiny. Economists expect housing starts to slide by 9% in January after surging 15.8% in December. Building permits are expected to fall 0.8% in January, following December’s 0.7% drop.
Deteriorating housing market conditions may impact home prices and consumer confidence. Weakening consumer confidence may affect spending, dampening demand-driven inflation. However, an unexpected rise in housing starts and building permits may challenge bets on an H1 2025 Fed rate cut.
Beyond the economic calendar, Ukraine peace talks and US tariff developments could further influence market sentiment. German auto, chip, and pharma stocks could face selling pressure after Trump’s latest tariff threat.
Near-Term Outlook
The DAX’s performance will largely depend on US data and central bank forward guidance.
- Weaker US data and dovish central bank forward guidance could push the DAX toward 23,000.
- Upbeat US housing sector data and a hawkish Fed stance may impact rate-sensitive German stocks, potentially dragging the Index below 22,500.
US trade policy and geopolitical tensions remain critical risk drivers. If US-EU trade rhetoric escalates, export-driven German stocks could suffer. However, any positive trade developments could support further DAX gains.
As of Wednesday morning, futures indicated a testy start to the mid-week session. DAX futures rose 2 points, while the Nasdaq 100 mini gained 43 points.
DAX Technical Indicators
Daily Chart
After the positive start to the week, the DAX sits well above the 50-day and 200-day Exponential Moving Averages (EMAs). The EMAs affirm bullish price signals.
A break above the February 18 record high of 22,883 could signal a move toward 23,000. The DAX could target 23,150 next if it breaks out from the crucial 23,000 level.
Conversely, if the DAX drops below 22,750, the bears may target the 22,500 level next.
With the 14-day Relative Strength Index (RSI) at 80.17, the DAX remains in overbought territory (RSI above 70). Selling pressure could intensify at the record high of 22,883.
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