Stocks Down Pre-Bell as Investors Digest Trump's Remarks on Rates, Oil Prices; Asia, Europe Mostly Up

The BSE Sensex closed a volatile session lower at 76,190.5 on Friday, ending a two-day winning streak, as traders opted for some profit-booking.

Weaker-than-expected Q3FY25 numbers, ongoing selling by FPIs, widespread valuation concerns, and fears over Donald Trump’s economic policies continued to dominate market sentiment.

Additionally, caution prevailed ahead of the Fed’s interest rate decision next week.

European bourses tracked moderately higher midday Friday, after US President Donald Trump's comments to the World Economic Forum on Thursday mentioned deregulation, and sourcing production in the US, more than tariffs.

Tech and retail stocks led gainers, while oil issues lagged.

Investors also eyed Wall Street futures modestly signaling red, and uneven closes overnight on Asian exchanges.

In economic news, the Eurozone's composite purchasing managers index (PMI), a combination of the region's manufacturing and services sectors, rose to 50.2 in January, up from 49.6 in December and striking above the 50-marker that separates growth from contraction, reported S&P Global.

The Eurozone services PMI logged at 51.4 in January, down from 51.6 in December, while the manufacturing PMI rose to 46.1, up from 45.1.

The pan-continental Stoxx Europe 600 Index was up 0.5% mid-session.

The Stoxx Europe 600 Technology Index was up 0.9%, and the Stoxx 600 Banks Index gained 0.1%.

The Stoxx Europe 600 Oil and Gas Index was off 0.5%, but the Stoxx 600 Europe Food and Beverage Index inclined 0.4%.

The REITE, a European REIT index, rose 0.3%, and the Stoxx Europe 600 Retail Index inclined 0.6%.

On the national market indexes, Germany's DAX was up 0.3%, and the FTSE 100 in London was down 0.4%. The CAC 40 in Paris was up 1%, and Spain's IBEX 35 lost 0.2%.

Yields on benchmark 10-year German bonds were higher, near 2.54%.

Front-month North Sea Brent crude-oil futures were up 0.6% to $78.73 per barrel.

The Euro Stoxx 50 volatility index was down 0.1% to 14.96, indicating below-average volatility for European stock markets in the next 30 days, a positive signal. A reading above 20 indicates choppier markets ahead, while below 20 suggests calmer exchanges.

By Steve Goldstein

Foreign investors are buying U.S. equities at a record pace

Dumb money is pejoratively a reference to retail investors (and also the title of the movie about the surge in GameStop stock). Basically, mom and pop usually arrive late to any investment news and end up being the exit liquidity for the professionals. That is not universally the case - in the GameStop situation, for instance, a major hedge fund was driven out of business - but the professionals usually have the upper hand.

If there's a group even dumber, unfortunately, it would be foreign retail investors. And they're buying U.S. stocks like they're going out of fashion.

Ed Yardeni, president of Yardeni Research, crunched the numbers and found foreigners purchasing U.S. equities at a record pace of $76.5 billion over the last three months. The chart tells the story: non-Americans have absolutely awful timing with regard to U.S. stocks, buying right before the 1987 crash, the bursting of the dot-com bubble in 2000, and the 2008 global financial crisis.

As he puts it: "Their buying has a record of being a contrary indicator. They tend to be big buyers right before bear markets," he wrote.

The Financial Times interviewed some of them earlier this month, for a story about South Korean holdings of U.S. stocks surging 65% last year.

Their logic is reasonable enough: the U.S. market has been home to the corporate winners, the likes of Apple, Nvidia and Tesla, while the local companies struggle to compete.

That pattern has been repeated throughout the world. In the U.K. in November, for instance, retail inflows into U.S. stock-market funds were GBP590 million while domestic equity funds saw outflows of GBP552 million, according to the Investment Association, a local trade group.

It's not just the great unwashed buying American stocks: the suits are too. Historian Niall Ferguson was at the Davos conference this week. "Almost everyone at the World Economic Forum in Davos, Switzerland is long United States, short European Union," he wrote for the Free Press. "The new Davos consensus is that Europe cannot get its economic act together and never will, whereas America is rocking and rolling, and if you don't own the big U.S. stocks, then the [fear of missing out] may kill you," he said.

"The trouble is that the Davos consensus is nearly always wrong," he said.

Being contrarian for contrarian's sake is not necessarily a winning strategy. Yardeni, for instance, is nonetheless one of the most bullish strategists on Wall Street. But in this case, there's a big valuation argument supporting the contrarians.

The iShares MSCI all-country index ex U.S. ETF ACWX has a forward price-to-earnings ratio of 13.4, while the SPDR S&P 500 ETF trust SPY has a forward price-to-earnings ratio of 22.1, according to FactSet.

The markets

U.S. stock index futures (ES00) (NQ00) edged lower early Friday after the S&P 500 SPX touched record highs on Thursday. The dollar (USDJPY) fell vs. the yen after the Bank of Japan raised its policy rate to the highest in 17 years. Gold (GC00) futures were trading near record highs.

Barron's Roundtable: Retirement Checklist: Saving, Spending, Security: Join us for conversations with experts on how to secure a nest egg in a pricey market, and how to estimate retirement healthcare costs.

The buzz

Texas Instruments stock (TXN) fell as the microchip maker forecast a smaller first-quarter profit than expected.

Boeing shares (BA) fell as the troubled airplane maker forecast a roughly $4 billion loss for the fourth quarter as deliveries fell and it took charges for higher estimated labor costs.

JPMorgan Chase (JPM) boosted CEO Jamie Dimon's pay by 8%, to $39 million.

American Express (AXP) and Verizon Communications (VZ) highlight Friday's earnings releases. See MarketWatch earnings calendar.

The flash readings of S&P Global purchasing managers indexes are due for release, along with existing home sales and the final reading of the University of Michigan's consumer sentiment index.

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The chart

The Federal Reserve has a reason to ignore import tariffs if they come, and not just because of President Donald Trump's hectoring. Tariffs would represent a one-time increase in the price level rather than a persistent source of inflation, economists argue. But those tariffs could affect inflation expectations, which the Fed does monitor, so Goldman Sachs economist Manuel Abecasis tried to calculate by how much. His conclusion is if the tariff-driven price increases were salient - that is, they were very visible, like gasoline prices - then inflation expectations could increase sizably.

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   GME     GameStop 
   PLTR    Palantir Technologies 
   META    Meta Platforms 
   AAPL    Apple 
   MSTR    MicroStrategy 
   TSM     Taiwan Semiconductor Manufacturing 
   AMZN    Amazon.com 
   AMD     Advanced Micro Devices 

Random reads

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A giant 1,000 pound Birkin bag held up traffic in Florida.

Clever rats have found a steady source of narcotics - Houston police evidence lockers.

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-Steve Goldstein

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Gran Tierra Energy late on Thursday released financial guidance for 2025, including a capital expenditure budget of US$240 million to US$280 million.

The company expects 2025 cash flow of US$260 million to US$300 million. Free cash flow is forecast at US$90 million before exploration and US$20 million after exploration.

The capital program includes 10 to 14 development wells and six to eight high-impact exploration wells.

Production is expected to be between 47,000 and 53,000 barrels of oil equivalent per day (boe/d), representing an increase of 44% at the midpoint from 2024 levels.

Gran Tierra produced 34,710 boe/d in 2024, up 6% from 2023.

The company also plans to allocate up to 50% of after-exploration free cash flow to share buybacks.

Separately, Gran Tierra said 2024 total proved liquids reserves increased to 128 million boe, with proved reserve life index rising to 10 years.

Total proved plus probable reserves in 2024 also rose to 217 million boe, with proved plus probable reserve life index increasing to 17 years.

The company added 89 million boe proved reserves and 159 million boe proved plus probable reserves.

Net present value before tax discounted at 10% was $2 billion for proved reserves and $3.2 billion for proved plus probable reserves.

It is Gran Tierra's sixth consecutive year of proved reserves growth, resulting in its highest total reserves in company history.

Markets in the United Arab Emirates closed mixed on Friday, with investors turning their focus on the US Federal Reserve's upcoming policy meeting next week.

At the close of trading, the FTSE ADX General Index gained 0.221%, while the DFM General Index fell 0.43%.

The Fed's Federal Open Market Committee is scheduled to meet on Jan 28 and Jan 29 to decide on monetary policy. Morgan Stanley analysts expect Fed Chair Jerome Powell to maintain a confident tone on disinflation, with a rate cut likely in March.

"The messaging in December, where Chair Powell emphasized a desire for the careful conduct of policy, clearly pointed to a pause in rate cuts. We expect modest alterations to the FOMC statement in the characterization of labor markets, where we think the Fed can reflect reduced downside risk through a message of labor market stability as opposed to an emphasis on cooling," Morgan Stanley said.

However, President Donald Trump has called for a rate cut amid falling oil prices. "With oil prices going down, I'll demand that interest rates drop immediately, and likewise they should be dropping all over the world," Trump said in a speech via video link at the World Economic Forum in Switzerland.

Back in the UAE and in corporate news, Etihad Airways is reportedly seeking investors for the potential sale of a 20% stake as part of a stock listing. The Abu Dhabi-based airline could raise as much as $1 billion in an initial public offering planned for the first quarter, sources told Reuters.

Americana Restaurants International Plc (ADX:AMR) concluded the acquisition of the Pizza Hut brand in Oman from the Khimji Ramdas Group, further expanding its regional presence. The restaurant operator was flat at closing.

The dollar's recent strength is losing momentum but choppy range-bound trading is more likely than the start of a significant downtrend, Societe Generale's Kit Juckes says in a note. The dollar falls after U.S. President Donald Trump told Fox News he'd rather not impose new tariffs on China but remains stronger against other G-10 currencies compared to two or six months ago, he says. "We've long thought the tariff threat is a bargaining position rather than a firm commitment, but they are still likely to be put in place in some form." Juckes sees the DXY dollar index stuck in a range of 99.000-110.000 for now. The index falls 0.5% to 107.528, having earlier hit a five-week low of 107.276.(renae.dyer@wsj.com)