U.S. stock prices are experiencing a decline as the excitement surrounding the so-called “Trump trade,” which surged following Donald Trump’s election as president, begins to wane.
On Tuesday, the S&P 500 index was down 0.4% in afternoon trading, slightly retreating from its recent all-time high. The Dow Jones Industrial Average experienced a drop of 290 points, or 0.7%, while the Nasdaq composite fell by 0.3%.
The stock market has been buoyed by optimism about Trump’s policies favoring lower taxes and faster economic growth. However, on Tuesday, some of the gains made by smaller U.S. companies, which are perceived to benefit from Trump’s America First agenda, were given back. The Russell 2000 index, which tracks these smaller firms, fell by 1.6%. Notably, Tesla, led by Elon Musk, a close Trump ally, saw a significant drop of 6.4%, marking its first loss since the election results last week.
Meanwhile, the stock most closely associated with Trump—Trump Media & Technology Group—fell by 7.3%. In contrast, Live Nation Entertainment reported higher-than-expected profits, leading to a 4.9% increase in its stock, bolstered by increasing concert ticket sales worldwide. Additionally, Tyson Foods surged by 8% after posting strong earnings and increasing its dividend.
On the other hand, Home Depot’s stock dropped 0.7%, despite exceeding profit expectations, as it faces ongoing customer spending slowdowns. Conversely, Mosaic experienced a 9.5% decline following disappointing profit and revenue results.
In the cryptocurrency sphere, Bitcoin reached a record high of nearly $90,000 before retracting slightly, reflecting ongoing volatility in the market.
In bond trading, the yield on the 10-year Treasury rose to 4.43%, indicating investor confidence in the resilience of the U.S. economy. This uptick in yields is partly due to expectations of higher government debt and inflation pressures, which economists attribute in part to Trump’s economic policies.
Investors await the next inflation update set for Wednesday, which is expected to show a slight increase in inflation to 2.6% for October. The underlying inflation trends, excluding volatile food and energy prices, are anticipated to remain steady at 3.3%.
Internationally, stock indexes in Europe and Asia also saw declines, with Hong Kong’s Hang Seng Index suffering a steep drop of 2.8%, closing below the 20,000 mark for the first time since a September stimulus announcement from China.
In summary, while the current market dynamics reflect a pullback from the gains seen post-Trump’s election, signs of strong corporate earnings from some sectors indicate underlying investor confidence. It remains to be seen how these trends will evolve, particularly in light of upcoming inflation data and broader economic conditions. This situation presents an opportunity for investors to reassess their strategies in an ever-fluctuating market landscape.