Republicans in Congress warn rising US bond yields could hit Trump’s tax cut plans

WASHINGTON – Just days before Donald Trump returns to power, some of his Republican allies in the US Congress are warning that the president-elect’s aggressive tax-cut agenda could fall victim to signs of worry in the bond market.

At a closed-door meeting on Capitol Hill, Republicans in the House of Representatives aired concerns that the estimated USD 4 trillion cost over the next 10 years of extending the 2017 Trump tax cuts could undermine the US government’s ability to service its USD 36 trillion in debt, which is growing at a pace of USD 2 trillion a year.

“The buyers of our bonds are getting nervous that we’re at the point that we cannot pay it back. That affects every one of us,” Republican Representative Ralph Norman told reporters. “If we can’t sell bonds, guess what? We’re in a ditch.”

The US bond market has become ultra-focused on what the incoming Trump administration and its allies in Congress may deliver as they strive to enact a wide-ranging Trump agenda that also includes the deportation of immigrants living in the country illegally and new tariffs on imports.

Congress also faces a mid-year deadline to address the nation’s debt ceiling or risk a default, after rejecting a Trump attempt last month to get lawmakers to do so before he takes office on Monday.

Longer-dated US Treasury yields jumped to their highest levels since November 2023 this week, with the 10-year bond hitting a high of 4.79%. It traded lower to 4.66% on Wednesday afternoon.

“Congress has to reduce the deficit,” Republican Representative Andy Barr said. “The bond market is telling Congress that if we don’t get our fiscal house in order, everybody’s mortgage rates, everybody’s credit card rates, everybody’s auto loan rates, are going to continue to go up.”

Democrats warn that extending the Trump tax cuts will mainly benefit corporations and the wealthy, while further undermining the nation’s fiscal position.

Democratic Senator Chris Murphy described Trump’s repeated comments about his desire to take over Greenland, Canada and the Panama Canal as a distraction from the implications of the tax cuts.

“They’re going to try to distract the press and the public and the information ecosystem away from the thievery that is going to happen with this massive tax cut,” Murphy said.

Trump has tapped Tesla Chief Executive Elon Musk, the world’s richest person, to find ways to sharply cut federal spending. Musk set an initial goal of USD 2 trillion per year that he this month called a “long shot,” saying that USD 1 trillion may be more achievable.

Even that lower figure represents almost one-sixth of all federal spending, a goal
that will be very difficult to meet given that Trump has ruled out cutting the popular Social Security and Medicare retirement programs, that Republicans typically resist cuts to defense spending, and that interest payments alone cost the nation USD 1 trillion per year.

In recent days, House Republicans have begun circulating a list of potential spending cuts totaling as much as USD 5.7 trillion over a decade – nearly 10% of current spending levels – that includes spending on Medicaid and the Affordable Care Act.

Republicans in the House and Senate expect to use a parliamentary tool known as reconciliation to move legislation containing the Trump agenda through Congress while circumventing Democratic opposition and the Senate’s 60-vote filibuster for most bills.

Barr said such a reconciliation package would need to contain a combination of economic stimulus and spending cuts credible enough to persuade investors that Congress is addressing the US fiscal woes.

“Will this reconciliation bill actually reduce the deficit? If they think that it will, that has the very real potential of lowering Treasury yields,” Barr said.

“What we need to say to the American people is, look, this is not austerity. This is not painful cuts. This is about lowering your mortgage payment.”

(Reporting by David Morgan; Editing by Scott Malone and Lincoln Feast.)

Oil rallies, settles at multi-month high on US crude draw, Russia sanctions

Oil prices rose more than 2% on Wednesday, supported by a large draw in US crude stockpiles and potential supply disruptions caused by new US sanctions on Russia, while a Gaza ceasefire deal limited gains.

Brent crude futures settled USD 2.11, or 2.64%, higher at USD 82.03 a barrel, the highest since August 2024. US West Texas Intermediate crude (WTI) settled up USD 2.54, or 3.28%, at USD 80.04 a barrel, the highest since July.

In post settlement trade, Brent rose to the highest since July and WTI gained more than USD 3 a barrel.

US crude oil inventories fell last week to their lowest since 2022, the US Energy Information Administration reported, as exports rose and imports fell. Gasoline and distillate inventories rose more than expected.

“The crude oil draw was largely on import-export dynamics,” said Bob Yawger, director of energy futures at Mizuho. “The exports are hard to believe,” he added, pointing to the fact that many were booked before the sanctions announcement.

The latest round of US sanctions on Russian oil could disrupt Russian oil supply and distribution significantly, the International Energy Agency said in its monthly oil market report.

Jitters over sanctions seem to be supporting prices, said Ole Hansen, head of commodity strategy at Saxo Bank. “Tankers carrying Russian crude seem to be struggling offloading their cargoes around the world, potentially driving some short-term tightness,” he added.

Limiting the gains, Israel and Hamas agreed to a deal to halt fighting in Gaza and exchange Israeli hostages for Palestinian prisoners, according to an official.

Concerns over supply disruption eased with Israel-Hamas ceasefire deal reached, Phil Flynn, analyst at Price Futures Group, said. Investors remained focused on signs of a strengthening economy and oil demand, he added.

The dollar index slipped on Wednesday after US data showed consumer prices rose slightly above expectations in December, heightening expectations for more interest-rate cuts by the Federal Reserve.

A weaker dollar usually supports oil prices and lower interest rates can boost economic growth.

Meanwhile, OPEC expects global oil demand to rise by 1.43 million barrels per day in 2026, maintaining a similar growth rate to 2025, the producer group said.

(Reporting by Nicole Jao, Emily Chow, Jeslyn Lerh, Arunima Kumar, and Enes Tunagur; Editing by David Goodman, Jan Harvey, Diane Craft, Rod Nickel, and David Gregorio)

Inflation revival persists as market risk despite CPI-fueled rally

A relatively benign US reading on consumer price increases triggered a sharp relief rally in stocks and bonds on Wednesday, but traders and investors warn that markets are likely to remain anxious about the pace of inflation.

The path ahead remains shadowed by ongoing uncertainty about the outlook for further Federal Reserve interest rate cuts and incoming president Donald Trump’s actions on issues like taxes and tariffs, market participants said.

“The issues that have been driving rates higher and weighing on stocks are still out there,” said Art Hogan, market strategist at B. Riley Wealth. “We just don’t know whether we’ll see tariffs that are surgical or sweeping, what kind of policy moves we’ll see in other areas that could feed into inflation or growth.”

While the consumer price index for December rose at a faster-than-expected pace, markets seized on the core CPI, which excludes the volatile food and energy components. Core CPI increased 0.2% in December after rising 0.3% for four straight months.

Stocks surged following the CPI report with the benchmark S&P 500 jumping 1.8%.

The benchmark 10-year Treasury reversed losses incurred in the wake of last Friday’s strong job creation report, pushing yields back down to 4.66%. Yields fall when bond prices rise.

“This reading beat expectations modestly, but traders pounce aggressively on any whiff of good news,” said Steve Sosnick, market strategist at Interactive Brokers. “It’s a number and a reaction that we have to view positively, although quite possibly it’s magnified by the negativity we’ve been battling.”

Yields had climbed sharply in recent weeks after the Fed in December tempered its outlook for rate cuts and projected firmer inflation in 2025 than it had previously.

Before the CPI report, “there was some whispering that we might actually see a rate hike,” said Jeff Weniger, head of equity strategy at WisdomTree Inc., a New York asset management firm.

But fears about the potential fallout that Trump’s policies could have on inflation remain a concern. Fed officials on Wednesday noted heightened uncertainty in the coming months as they await a first glimpse of the incoming administration’s policies, even as they said Wednesday’s data showed inflation was continuing to ease.

Following the CPI report, Rick Rieder, BlackRock’s chief investment officer of global fixed income, said progress on inflation “may be slow and uneven, not least due to the great uncertainties that face the economy with fiscal policy changes coming over the next year.”

For example, Rieder said in emailed comments, changes to the tariffs and trade regime “do hold the potential to increase core goods inflation for a time.”

As the market remains data-dependent, volatility could become more common. Kevin Flanagan, head of fixed income strategy at WisdomTree, expects that moves of 10 to 15 basis points daily for the 10-year Treasury could become the new norm.

Following the data, traders of interest-rate futures still projected the Fed waiting until June to deliver its next rate cut. But now they are pricing about even odds the central bank will follow with a second rate cut by year’s end. Before the report, markets reflected bets on only a single cut in 2025.

Tina Adatia, head of fixed income client portfolio management for Goldman Sachs Asset Management, said in a note to clients that the CPI data strengthens arguments for further cuts but “the Fed has scope to be patient.”

“More good inflation data will be required for the Fed to deliver further easing,” Adatia said.

(Reporting by Suzanne McGee and Saqib Iqbal Ahmed; editing by Lewis Krauskopf and Chizu Nomiyama)

US yields sink as Fed rate cuts still on track after CPI data

NEW YORK – US Treasury yields fell on Wednesday after data showed underlying inflation in the world’s largest economy softened last month, suggesting that the Federal Reserve remained on track to cut interest rates this year.

The number of cuts remained up for debate, but the inflation report suggested that a rate hike this year, which some in the market had entertained given the strength of recent economic data, was off the table, for now.

Data showed that the headline Consumer Price Index rose 0.4% last month after climbing 0.3% in November. In the 12 months through December, the CPI advanced 2.9% after increasing 2.7% in November. Economists polled by Reuters had forecast the CPI gaining 0.3% and rising 2.9% year-on-year.

However, excluding the volatile food and energy components, the CPI increased 0.2% in December, after a 0.3% rise in the previous month. The so-called core CPI had risen 0.3% for four straight months. In the 12 months through December, core CPI increased 3.2% after climbing 3.3% in November.

“Today was probably short-covering from a positioning standpoint just looking at the magnitude of the move,” said Mike Sanders, portfolio manager and head of fixed income at Madison Investments in Madison, Wisconsin.

“It was a good number: shelter was less than what it was in the prior two months, core services were a tad slower, and core goods were also a touch lower. But the magnitude of the (rates) move, considering the slight beat in forecasts, seems a little bit much,” he added.

The US 10-year yield fell for a second straight day, and by late US afternoon was down 13.1 basis points at 4.657%, its largest daily fall since late November.

The US two-year yield, which reflects interest rate expectations, fell 9.7 basis points to 4.268%, its biggest one-day decline in absolute terms in roughly two months.

Following the data, the US rate futures market has fully priced in a pause in easing at the Fed meeting later this month, and factored in 38 bps of cuts this year, according to LSEG estimates. That was up from about 26 bps of easing late Tuesday. Wednesday’s numbers though still showed less than two rate reductions of 25 bps each.

James Knightley, chief international economist at ING, wrote in a research note after the CPI report, that the inflation trend “remained too hot for comfort,” and said there is greater likelihood that the Fed pause is extended well beyond January.

“Nonetheless, the near 10% jump in the trade-weighted dollar since September and the surge in Treasury yields — still up more than 100 basis points since September despite today’s moves — will be headwinds to growth. (That) will help dampen inflation pressures too….and should give the Fed greater scope to respond with lower rates in the second half of 2025.”

The US yield curve, meanwhile, flattened or reduced its steepness following the inflation report, with the spread between two- and 10-year yields last at 38.7 bps US2US10=TWEB, compared with 42.3 bps on Tuesday.

The flattening, however, did not suggest a change in trend, but rather indicated some position unwinding, analysts said, after the curve steepened sharply or widened its gap since early December.

On Monday for instance, the yield curve hit 47.7 bps, its steepest since May 2022.

(Reporting by Gertrude Chavez-Dreyfuss; additional reporting by Caroline Valetkevitch in New York; Editing by Emelia Sithole-Matarise, Kirsten Donovan, and Chizu Nomiyama)

Global inflation relief lifts bond yield gloom

At last, some breathing room for investors after US and UK inflation figures on Wednesday eased the vice-like grip that the soaring dollar and global bond yields had increasingly been exerting over markets.

It is too early to say this marks a turning point, but fixed income and emerging markets have been beaten down so much lately that they were primed for a ‘good news’ reversal. Upbeat US bank earnings and, on the margins, the ceasefire between Israel and Hamas will also help support market sentiment on Thursday.

But it’s the UK and especially the US inflation news that will drive markets more, and the rapid slide in bond yields and jump in stocks should pave the way for a positive day in Asia on Thursday.

These numbers may not ultimately alter the Fed’s direction or even pace of rate cuts this year. But they do take the heat off policymakers and buy them more time to assess their next steps.

For investors, they were instant triggers to reverse some of the bond selling that had snowballed in recent weeks and which had started to bleed into equity markets. Yields across the US Treasury curve posted their biggest one-day declines since Nov. 25, and rates traders brought forward the next expected Fed rate cut to June from September.

Curiously, however, the impact on the dollar was muted. It fell sharply against the yen, but barely budged against the euro. Perhaps country-specific factors are playing a greater role in setting exchange rates right now rather than solely US yields and rate expectations.

That may be the case in Asia, where policy and politics are spicing up local markets. Indonesia’s rupiah sank to its lowest in more than six months and the country’s stocks leaped on Wednesday after the central bank delivered a surprise rate cut.

Not one of the 30 analysts polled by Reuters expected the move.

The Bank of Korea delivers its latest decision on Thursday, and it could not be at a more volatile time for the country, after impeached President Yoon Suk Yeol was arrested on Wednesday and questioned for hours by investigators in relation to a criminal insurrection probe.

The BoK is expected to cut its base rate by 25 basis points to 2.75%, according to 27 out of 34 economists polled by Reuters, with the remaining seven forecasting no change.

Given the tense domestic political situation and in light of the cooler-than-expected US inflation data, could the BoK surprise markets with a 50 bps cut to try and boost growth and loosen financial conditions?

Bank Indonesia’s shock move shows that even unanimous consensus forecasts are not always the one-way bet they might seem.

Here are key developments that could provide more direction to markets on Thursday:

– South Korea interest rate decision

– South Korea fallout from President Yoon’s arrest

– Australia unemployment (December)

(Reporting by Jamie McGeever; Editing by Bill Berkrot)

Dollar strength reminds Wall Street ‘US exceptionalism’ isn’t isolationism: McGeever

ORLANDO, Florida – While “US exceptionalism” has undoubtedly helped drive Wall Street’s record-busting returns in recent years, it should not be confused with isolationism.

The fourth-quarter US earnings season that gets underway in earnest this week is a reminder that American firms – magnificent as some may be – still operate in a global marketplace. Weak economies and lackluster demand abroad, combined with a robust dollar, could erode American corporate profitability, calling into question whether the US is so exceptional after all.

With the dollar appreciating broadly and rapidly, exchange rates will soon bite into corporate profitability. The question is how deep.

Analysts at Apollo Global Management note that more than 41% of S&P 500 firms’ revenues come from abroad. That’s the highest since 2013 and not far behind the record high of 43.3% in 2011.

This leaves these firms vulnerable on two levels. First, sub-par growth in many key economies and trading partners such as China, Canada and Europe should, all else being equal, cause demand for US goods to weaken. And second, revenues accrued abroad will now be worth significantly less in dollar terms than they would have a year ago.

The dollar is on a tear. It has risen 10% since late September and is up 7% year-over-year. It is now the strongest it has been in more than two years against a basket of G10 currencies, notching multi-year highs against sterling and the Canadian dollar.

There is little sign of this trend reversing any time soon, as resilient US growth and sticky inflation lift Treasury yields and force investors to radically rethink their 2025 Fed outlook. Bank of America economists no longer expect any rate cuts this year and others are even suggesting the central bank’s next move may be a hike. In turn, Goldman Sachs analysts on Friday raised their “stronger for longer” dollar forecasts.

DOLLAR IDIOSYNCRASY

Although much of the classic economic playbook has been ripped up since the pandemic, theory still suggests a 10% year-on-year increase in the dollar should reduce S&P 500 earnings by around 3%, according to BofA. Currently, estimates point to 9.5% growth in aggregate earnings per share for the fourth quarter, and 14% for calendar year 2025, according to LSEG.

But fourth-quarter revenue growth is only estimated at 4.1%, a relatively slow pace in part due to the exchange rate.

Revenue “beats” tend to decline in periods of dollar strength compared with periods of dollar weakness, Goldman Sachs equity analysts say. So we can reasonably expect that the share of firms beating consensus sales forecasts this quarter will be lower than the 42% that did so in the previous period, when the dollar’s year-on-year rise was only 2%.

But even though dollar strength is likely to feature in many CEO and CFO calls this earnings season, its impact on US earnings may be more “idiosyncratic” than widespread, according to Morgan Stanley’s Mike Wilson.

He has noted that the stocks of companies with “relatively low foreign sales exposure and low sensitivity to a stronger dollar from an EPS growth standpoint” have begun to outperform since the dollar started to strengthen in October.

He characterizes “low” foreign exposure as companies that derive less than 15% of their revenues from abroad, giving them “minimal” sensitivity to the dollar’s exchange rate. Some of the big names in this camp include United Healthcare, T-Mobile, and Home Depot, while some large caps that derive more than 15% of their revenues from overseas include PepsiCo, IBM, and Oracle.

The dollar’s strength is not yet at a level that truly threatens corporate America’s competitiveness and profitability. But if it persists, this earnings season could be a taste of what’s to come.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever; Editing by Andrea Ricci)

Dollar strength reminds Wall Street ‘US exceptionalism’ isn’t isolationism: McGeever

ORLANDO, Florida – While “US exceptionalism” has undoubtedly helped drive Wall Street’s record-busting returns in recent years, it should not be confused with isolationism.

With the dollar appreciating broadly and rapidly, exchange rates will soon bite into corporate profitability. The question is how deep.

Analysts at Apollo Global Management note that more than 41% of S&P 500 firms’ revenues come from abroad. That’s the highest since 2013 and not far behind the record high of 43.3% in 2011.

DOLLAR IDIOSYNCRASY

But fourth-quarter revenue growth is only estimated at 4.1%, a relatively slow pace in part due to the exchange rate.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever; Editing by Andrea Ricci)

Fleeting respite from yields, dollar; Indonesia sets rates

A pause in the global bond selloff took some wind out of the dollar’s sails and allowed equities to regain their footing early on Tuesday but Wall Street’s wobble ahead of US inflation data could put Asian markets back on the defensive on Wednesday.

The dollar and Treasury yields losing steam should offer emerging and Asian markets some welcome respite. But the reversal in US stocks could ensure it is short-lived, especially with US CPI inflation numbers landing after Asia has closed.

Asian markets were buoyant on Tuesday. The MSCI Asia ex-Japan index rebounded from a five-month low and blue chip Chinese stocks leaped more than 2.5%, as regulators pledged more support for markets and local chip firms rallied after the US stepped up its tech curbs.

Japanese stocks went the other way, however, after Bank of Japan Deputy Governor Ryozo Himino flagged the chance of a rate hike next week. The Nikkei 225 index chalked up its biggest fall in two and a half months, slumping 1.8%.

That’s the regional local backdrop to the open on Wednesday, where the main local event will be Bank Indonesia’s policy decision. Spooked by recent currency volatility, BI is widely expected to keep its main interest rate on hold at 6.00%.

With inflation at the lower end of the central bank’s target range of 1.5%-3.5%, monetary policy is being directed towards stabilizing the rupiah, which is down around 7% against the dollar from its September peak.

Like most emerging countries, Indonesia has been hit hard by spiking US bond yields and the dollar “wrecking ball”, a tightening of financial conditions that is restricting BI’s ability to ease policy.

According to Goldman Sachs, Indonesia’s financial conditions have deteriorated sharply since late September, mainly due to the rise in long rates and decline in equities. They are now the tightest since October 2023, and close to the tightest since October 2022.

The threat of a global trade war and punitive US tariffs on many countries – especially China – continues to weigh on market sentiment as US president-elect Donald Trump’s Jan. 20 inauguration draws closer.

Meeting with European Council President Antonio Costa on Tuesday, Chinese President Xi Jinping said China and the European Union have a robust “symbiotic” economic relationship and Beijing hopes the bloc can become “a trustworthy partner for cooperation”.

Meanwhile, Trump said on Tuesday he will create a new department called the External Revenue Service “to collect tariffs, duties, and all revenue” from foreign sources.

South Korea’s won is one of the best-performing Asian currencies this year, but could fall on Wednesday after Yonhap reported that authorities investigating impeached President Yoon Suk Yeol were at his official residence to execute an arrest warrant.

Here are key developments that could provide more direction to markets on Wednesday:

– Indonesia interest rate decision

– South Korea unemployment (December)

– Japan services tankan survey (January)

(Reporting by Jamie McGeever)

US yields decline after tame producer prices

NEW YORK – US Treasury yields drifted lower on Tuesday after data showed producer prices increased modestly in December and came in lower than expected, with investors also taking advantage of the drop in prices that led to the recent surge in yields to cover short positions.

The benchmark 10-year yield was down 1.7 basis points (bps) at 4.788% after hitting 4.805% overnight, the highest since November 2023.

On the short-end of the curve, the two-year yield, which is sensitive to rate outlook expectations, fell 3.7 bps to 4.365%. On Monday, it climbed to 4.426%, the strongest level since July.

Data showed that US producer prices rose moderately last month, with the index for final demand gaining 0.2% last month after an unrevised 0.4% advance in November. Economists polled by Reuters had forecast PPI climbing 0.3%.

“The pullback in yields could be due to some consolidation. This has been a pretty fast and furious move up to around 4.80% in the 10-year,” said Zachary Griffiths, senior investment grade strategist at CreditSights, in Charlotte, North Carolina.

“If you look at the PPI number, they were a bit better than the forecast (meaning lower inflation). I think that played into it a bit, even though it doesn’t have any bearing in terms of the Fed meeting. The Fed is clearly on hold, especially after the payrolls numbers last Friday, and at least for the next couple of meetings.”

Investors are now looking to Wednesday’s US consumer price index (CPI) report for confirmation about the next move by the Federal Reserve. Wall Street economists are forecasting that the CPI inched up 0.3% in December, unchanged from the previous month, with the year-on-year figure climbing to 2.9% from 2.7% in November, according to a Reuters poll.

The core CPI, meanwhile, is expected to have risen 0.2% in December, down from 0.3% in the prior month.

“From here, we expect that the theme in the Treasury market will be one of consolidation and we’re wary of a grind marginally higher in yields in the absence of any other tradable events as we watch for more insight from the incoming administration regarding initial tariff plans,” wrote Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York, following the PPI data’s release.

Bloomberg News earlier reported that Trump’s advisors are in the early stages of planning only a flexible and gradual phase-in of tariffs. Under the proposed plan, US import tariffs would increase in 2-5% increments each month, at the discretion of the President, to try to avoid an inflationary spike.

The US yield curve, meanwhile, steepened on Tuesday, with the spread between two- and 10-year yields touching 42.1 bps. On Monday, the yield curve touched 47.7 bps, the widest gap since May 2022.

The curve typically steepens in an easing cycle as the rise at the short end is restrained, reflecting interest rate cuts.

In the rate futures market, traders on Tuesday fully priced in a rate-cut pause at the Fed’s policy meeting later this month. Futures pricing also implied just 30 bps of rate easing in 2025, or one 25-bp cut, LSEG data showed, using the January 2026 fed funds futures. That cut will most likely start again either at the July or September meeting.

Two weeks ago, the rates market had priced in 49 bps in cuts, or about two rate reductions of 25 bps each.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Angus MacSwan and Nick Zieminski)

Bond yields dip, S&P 500 ends up; CPI, earnings ahead

NEW YORK – US Treasury yields dipped while the S&P 500 ended slightly higher on Tuesday after data showed US producer prices rose less than expected in December, but investors remained cautious ahead of US consumer price data on Wednesday and the start of quarterly earnings reports.

The US producer price index climbed 0.2% month-on-month in December, below expectations for a 0.3% increase and down from 0.4% in November.

Investors have been worried about persistent US inflation. The PPI report did not change the view that the Federal Reserve would not cut interest rates again before the second half of this year, and investors still await the more closely watched US consumer price index report.

CPI data is expected to show month-on-month inflation held at 0.3% in December while the year-on-year figure climbed to 2.9%, from 2.7% in November.

Investors are also gearing up for US fourth-quarter 2024 earnings, with results from some of the biggest US banks due starting Wednesday. Lenders were expected to report stronger earnings, fueled by robust dealmaking and trading.

The S&P 500 shifted between gains and losses throughout the session before ending 0.1% higher. The Dow also ended the day higher, while the Nasdaq finished lower.

“Tomorrow really marks the start of earnings season. With everything going on market wise, economy wise, and politically, it’s going to be a cautious period for a while. I’m not expecting much out of the markets until we get well into earnings season and see what companies report and what they say about how things are,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

The Dow Jones Industrial Average rose 221.16 points, or 0.52%, to 42,518.28, the S&P 500 rose 6.69 points, or 0.11%, to 5,842.91 and the Nasdaq Composite fell 43.71 points, or 0.23%, to 19,044.39.

MSCI’s gauge of stocks across the globe rose 2.62 points, or 0.31%, to 834.41. The STOXX 600 index fell 0.08%.

The potential for tariffs that could boost inflation once President-elect Donald Trump is in office also hangs over the market.

Bloomberg reported that Trump’s aides were weighing ideas including increasing tariffs by 2% to 5% a month to increase US leverage and to try to avoid an inflationary spike.

“There’s a lot of concern over the Trump platform and whether it will be inflationary, both from a tariff perspective as well as from a tax reduction perspective,” said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

The yield on the benchmark 10-year Treasury note eased, but it remained close to its 14-month high.

It was last down slightly at 4.788% after hitting 4.805% overnight, the highest since November 2023.

Higher yields have weighed on equities by making bonds relatively more attractive and increasing the cost of borrowing for companies.

The dollar weakened against the euro but stayed near its highest level in more than two years.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,

fell 0.21% to 109.19, with the euro down 0.03% at USD 1.0304.

Oil prices fell after a US government agency forecast steady US oil demand in 2025 while it raised its forecast for supply.

US crude fell USD 1.32 to settle at USD 77.50 a barrel and Brent dropped USD 1.09 to settle at USD 79.92.

(Reporting by Caroline Valetkevitch in New York; additional reporting by Harry Robertson in London; Editing by Christina Fincher, Angus MacSwan, Cynthia Osterman, and Daniel Wallis)

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