Markets pushed higher on Tuesday despite President Donald Trump announcing fresh tariff threats against South Korea, as investors remained focused on upcoming earnings from major technology companies. The dollar continued to weaken while gold and silver held firm amid global uncertainty, according to market analysts. Mega-cap tech earnings this week appear to be taking priority over trade policy concerns for many investors.
Trump announced on Monday that he would increase tariffs on imported South Korean goods to 25% from 15%, citing the South Korean parliament’s apparent failure to quickly implement a pact agreed last year with President Lee Jae Myung to boost investment in U.S. business projects. Despite the tariff announcement, South Korea’s KOSPI exchange rose to a new high on Tuesday.
Tech Earnings Drive Market Sentiment
The S&P 500 ended 0.5% higher on Monday, with futures pointing to further gains ahead of Tuesday’s open. Major technology companies including Microsoft, Meta, and Tesla are scheduled to report earnings on Wednesday, drawing significant attention from market participants. The Nikkei also posted gains, reflecting broader global equity strength despite ongoing trade tensions.
Additionally, bourses around the world appeared to shrug off the fresh tariff threat as shares hit new record highs. The focus on corporate earnings has temporarily overshadowed concerns about escalating trade barriers and tariff policies from the Trump administration.
Dollar Weakness and Safe Haven Demand
While equity investors’ attention was focused elsewhere, the potential for yet more trade disruption helped keep gold and silver elevated on Tuesday morning. The greenback remained under pressure after experiencing its biggest three-day slide since last April, according to the dollar index. The dollar index slipped further after edging higher briefly on Tuesday.
Meanwhile, Japan’s yen held its best levels of the year on continued speculation about joint U.S.-Japan action to prop it up ahead of next month’s Japanese snap election. Markets remained on tenterhooks regarding potential currency intervention, with unilateral Japanese action to buy yen having occurred several times over the past three years, though joint action with Washington authorities has not been seen for about 15 years.
Federal Reserve Decision Looms
Investors are awaiting the Fed’s next policy decision on Wednesday, with interest rates expected to be held steady. However, further dollar volatility could lie ahead depending on how the central bank responds to threats to its independence and how Trump reacts to the decision. The president has long called for faster rate cuts from the Federal Reserve.
In contrast to the escalating tariffs from the Trump administration, leaders elsewhere are lifting trade barriers. India and the EU announced a long-delayed trade deal to cut duties on most goods, including nearly 97% of EU exports and 99.5% of Indian exports. The formal signing of the deal, dubbed “the mother of all deals,” will take place after vetting is completed in both India and the EU, with an Indian government official indicating the deal should be implemented within a year.
Treasury Market Activity
With another heavy week of debt sales in the background, long-term U.S. Treasury yields have subsided this week ahead of the Fed meeting. The Treasury market is also awaiting a 5-year note auction scheduled for Tuesday afternoon. Consumer confidence data for January is expected to provide additional insight into the health of the U.S. economy.
The Fed’s policy statement and any guidance on future rate decisions will be closely watched following Wednesday’s conclusion of the two-day Federal Open Market Committee meeting. Market participants will also monitor how the central bank addresses ongoing concerns about its independence and the broader economic implications of the administration’s trade policies.
