Stocks pulled back on Tuesday as signs emerged that recent gains may have overextended valuations. Investors are also evaluating the potential economic impact of Donald Trump’s cabinet picks. Europe’s Stoxx 600 index dropped by 1%, nearly wiping out Monday’s gains, while U.S. futures dipped following five consecutive days of gains for the S&P 500. Treasuries fell as well with trading resuming post-holiday, while Bitcoin continued its rally, approaching the $90,000 mark.
Investors have increased their U.S. equity exposure to a three-year high since Trump’s election, but Citigroup analysts caution the rally may be peaking. Trump’s cabinet selections, reportedly including China critics Senator Marco Rubio as Secretary of State and Representative Mike Waltz as National Security Advisor, suggest a potentially tougher U.S. stance toward China, which could impact inflation and Federal Reserve policy.
Hong Kong’s Hang Seng Index also declined by up to 3.3% amid these concerns. Key U.S. inflation data, set for release Wednesday, will offer further insight, with the core consumer price index expected to show consistent growth on a monthly and annual basis.
