The US markets closed mostly higher on Tuesday, marked by swings in and out of negative territory as investors debated the potential impact of a trade war in the wake of President Donald Trump announcing a pair of tariffs, a strategy that has faced opposition from key Republicans such as House Speaker Paul Ryan. Investors will continue to follow Federal Reserve speakers for insights into the central bank’s views on the economy. Separately, Dallas Fed President Rob Kaplan said he still expects three interest-rate increases this year, and that he wants to get started soon. Recent volatility in the market has come as investors fret that inflation could be returning to the economy, and that the Fed could have to become more aggressive in combating such a scenario.
Meanwhile, Federal Reserve Governor Lael Brainard, the sole remaining member of the board who was appointed by President Barack Obama, said that a higher path of interest rates could become warranted if a variety of economic tailwinds give the economy forward thrust. Brainard said there is growing confidence that the Fed will achieve its inflation target. Indeed, the US could see a mild, temporary overshoot of the 2% target over the medium term. Brainard sounded more concerned that the Fed wasn’t moving fast enough. She said the Fed was entering an uncertain stage, unsure about how the economy might respond if the unemployment rate continues on its present trend, which would put the jobless rate at a level not seen since the 1960s.
On the economy front, US factory orders fell for the first time in six months in January amid lower demand for transportation and defence equipment. Factory orders slid 1.4 per cent to $491.7 billion in January from the previous month. While in line with market expectations, the figure stands in contrast to the 1.8 per cent increase recorded in December and marks the gauge’s first drop since July. Within this, orders for transportation equipment were down 10 per cent while those for defence aircraft and non-defence aircraft slumped nearly 46 per cent and 28 per cent respectively.
The Dow Jones Industrial Average added 9.36 points or 0.04 percent to 24,884.12, the Nasdaq gained 41.302 points or 0.56 percent to 7,372.01, and the S&P 500 was up by 7.18 points or 0.26 percent to 2,728.12.
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