February 12, 2025: US Markets Mixed as Powell's Stance Meets Trump Tariffs—Navigation Guide for Traders

Hook

While the S&P 500 barely budged (+0.03%), beneath the surface, a battle between Powell's rate-cut patience and Trump's new 25% steel tariffs created significant sector divergence. Here's how traders can position for this policy crossroads.

Core Analysis

Key Developments:

  • Fed Chair Powell confirmed no rush to cut rates, pushing 10-year Treasury yields to 4.54% vs. 4.45% expected
  • Trump announced 25% tariffs on steel/aluminum imports effective March 12
  • US CPI report tomorrow expected at +0.3% MoM, 2.9% YoY

Sector Breakdown:

  • Winners: Apple (+2.2%) led tech on AI developments; Coca-Cola surged 4.7%
  • Losers: Tesla (-6.3%) led growth stocks lower; trade-sensitive industrials weakened
  • European luxury/financials pushed STOXX 50 to record 5,392

Strategic Playbook

Short-Term (Traders):

  • Consider pairs trades: Long defensive tech (Apple) vs. short growth names (Tesla)
  • Watch for JPY weakness continuation ahead of US CPI data
  • Monitor European stocks as STOXX 600 (+0.3%) and DAX (22,034) hit fresh peaks

Long-Term (Investors):

  • Maintain 5% commodity allocation as portfolio volatility hedge
  • Consider European exposure via STOXX 50 ETFs given record highs and momentum
  • Look for opportunities in high-yield corporate debt amid rate uncertainties

Forward Outlook

Catalysts:

  • January US CPI report (Feb 13) - critical for rate cut trajectory
  • EU response to Trump tariffs - watch for countermeasures
  • Asian markets showing resilience: Hang Seng (+2.4%), Nikkei (+0.5%)

Risk Radar:

  • Escalating trade tensions could pressure global supply chains
  • Bond market volatility if CPI surprises significantly in either direction
  • Growing correlation between stocks and bonds (0.6) may impact traditional portfolio hedging