US Stock Market Retreats Amid Financial and Policy Uncertainty: Cautious Sentiment Persists Despite Easing Inflation

On the 13th in New York (local time), U.S. equity markets pulled back after recent record highs, closing lower. The Dow Jones Industrial Average fell about 0.6% and the S&P 500 declined roughly 0.3%, while the Nasdaq Composite hovered near the flatline with a slight uptick. Profit-taking in large-cap stocks was widespread. With December’s Consumer Price Index matching expectations, it failed to ignite renewed hopes for early Fed easing, and overlapping uncertainties around interest rates and policy dampened risk-asset appetite.

On the economic data front, December CPI rose 2.7% year-on-year and core CPI was up 2.6%, broadly in line with forecasts and reinforcing the view that inflation is moderating but at a gradual pace. This strengthened the belief that the Federal Reserve will hold rates steady for now and maintain a data-dependent approach, tempering short-term expectations for rate cuts and weighing on equity valuations. At the same time, signs of cooling in recent employment figures underscored investors’ perception that the Fed’s policy leeway is limited between slowing growth and price stability, further constraining sentiment.

On the policy and regulatory side, debates over Fed independence and the prospect of tougher financial regulation put pressure on the financial sector. The U.S. administration’s proposal to cap credit-card interest rates at 10% for a year, coupled with the risk of clashes with regulators, drove a broad sell-off in bank stocks and sent the S&P 500 Financials Index sharply lower. Even though major banks reported generally solid fourth-quarter results, worries over shrinking credit and consumer-finance margins and rising loan-loss provisions highlighted regulatory and policy risks over earnings momentum early in the reporting season.

O by Zlaťáky.cz

On the global front, geopolitical tensions and commodity price moves spurred both safe-haven demand and sector-specific divergence. U.S. hints at additional tariffs on third countries trading with Iran revived fears of trade disruptions and supply-chain strain, triggering a revaluation of cyclical sectors. Meanwhile, gold prices—supported by a softer dollar and heightened political and policy uncertainty—pushed toward record highs as investors sought defensive assets. Energy prices, however, saw muted swings as demand-slowdown concerns offset Middle East supply risks. Taken together, these dynamics suggest that despite the positive signal of cooling inflation, U.S. markets opted for a short-term adjustment in anticipation of policy, regulatory, and geopolitical headwinds.