By Jamie McGeever
ORLANDO, Florida, Feb 3 (Reuters) -
Wall Street slumped on Tuesday on concerns that tech companies could face steeper competition and lower margins as a result of AI, while precious metals rebounded sharply on renewed U.S.-Iran tensions.
More on that below. In my column today I look at how President Donald Trump is shifting his interest rate focus to getting long-term U.S. yields down. The trouble is, the Fed has little control over that, no matter what it does with the policy rate.
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
<ol>
<li>U.S. shoots down Iranian drone approaching aircraft carrier, official says</li>
<li>Australia reverses course with rate hike, markets bet on more</li>
<li>Dollar risk premium is rebuilding - Mike Dolan</li>
<li>How dollar disorder could be a wake-up call for global investors</li>
<li>SpaceX acquires xAI in record-setting deal as Musk looks to unify AI and space ambitions</li>
</ol>
Today’s Key Market Moves
<ul>
<li>STOCKS: Wall Street slumps, Nasdaq -1.4%. Europe little changed, Asia rallies - India +2.5%, Japan +4%, South Korea +7%.</li>
<li>SECTORS/SHARES: Walmart +3% to become a $1 trillion company, Palantir +7%, PayPal -20%, Expedia -15%. Materials +2%, energy +3%, tech -2%, software and services -4%.</li>
<li>FX: Aussie dollar +1% after rate hike, Indian rupee +1% on U.S.-India trade deal. Bitcoin -2%.</li>
<li>BONDS: U.S. yields inch up 1-2 bps, curve stays steep; German 30-year yield rises to 3.56%, highest since 2011.</li>
<li>COMMODITIES/METALS: Gold +6% for its best day since 2008, silver +7%. Oil +3%.</li>
</ul>
Today’s Talking Points
<ul>
<li>(Big) swings and roundabouts</li>
</ul>
The wild price ride across a range of markets continued apace on Tuesday. Precious metals rebounded from Friday’s historic losses with historic gains, as did South Korean equities, while India’s rupee had its best day in six years.
It’s a testing time for investors, and not just traders with a typically short-term horizon. Price moves and volatility on this scale can cause serious portfolio damage. And compounding the difficulty is finding a reliable hedge - traditional safe harbors like Treasuries, the dollar and gold are not without risk either.
<ul>
<li>RBA canary in the coal mine?</li>
</ul>
The Reserve Bank of Australia isn’t the first G10 central bank to reverse course and raise interest rates. It follows the Bank of Japan, which is grappling with its own unique set of economic, political, FX and bond market issues.
But the RBA’s move is potentially significant. It raised rates because inflation is drifting further above the bank’s 2-3% target range. Could the U.S. Fed be forced to do likewise later this year? After all, inflation has been above target for five years and is showing little sign of cooling.
<ul>
<li>U.S.-Iran tensions fire up again</li>
</ul>
Just as it seemed like U.S.-Iran relations might be thawing, investors on Tuesday were grappling with news that the U.S. military shot down an Iranian drone in the Arabian Sea, and armed boats approached a U.S.-flagged vessel in the Strait of Hormuz.
Nuclear talks between the U.S. and Iran are scheduled for Friday, but developments today suggest they will be fraught. Indeed, they might not take place at all, with Iran demanding that the venue and scope of negotiations be changed. Some level of geopolitical risk premium should still be in market pricing.
What could move markets tomorrow?
<ul>
<li>Japan PMI (January, final)</li>
<li>Japan earnings including Mitsubishi UFJ, Panasonic, Sumitomo</li>
<li>Poland interest rate decision</li>
<li>Euro zone PMI (January, final)</li>
<li>Euro zone inflation (January, flash)</li>
<li>UK services PMI (January)</li>
<li>U.S. ISM services (January)</li>
<li>U.S. ADP private sector employment (January)</li>
<li>U.S. PMI (January, final)</li>
<li>U.S. earnings including Alphabet, Eli Lilly, Uber, Qualcomm</li>
<li>U.S. Federal Reserve officials scheduled to speak include Richmond Fed President Thomas Barkin and Governor Lisa Cook</li>
</ul>
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
S&amp;P 500 software and services index lowest since April
<img src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/49XPLXm?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="1916" height="836" original-src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/49XPLXm"/>
(By Jamie McGeever; Editing by Nia Williams)

Wall Street faced a slump due to concerns over AI competition affecting tech margins, while precious metals surged amid renewed U.S.-Iran tensions. Key market moves included a 1.4% drop in Nasdaq, a 3% rise in Walmart, and significant gains in gold and silver. The Reserve Bank of Australia raised rates, hinting at potential U.S. Fed actions. Geopolitical risks remain high as U.S.-Iran relations deteriorate ahead of nuclear talks. Upcoming market movers include various economic indicators and earnings reports.

- Wall Street experienced a decline driven by concerns over tech competition due to AI and renewed U.S.-Iran tensions, with precious metals rebounding sharply.  
- The Reserve Bank of Australia's rate hike signals potential inflation issues, raising questions about the U.S. Fed's future actions as inflation remains above target.  
- Geopolitical risks are heightened after the U.S. military downed an Iranian drone, casting uncertainty over upcoming nuclear negotiations and market stability.

Reuters

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TRADING DAY-AI, geopolitics take their toll