Wall Street markets traded without a clear direction on Tuesday, while the U.S. dollar gave back part of its earlier gains. Fresh U.S. inflation data reinforced expectations that interest rate cuts could still arrive later this year. At the same time, oil prices jumped sharply as political unrest in Iran outweighed concerns about excess global supply.
Investor sentiment remained fragile after Donald Trump said on Monday that the United States would impose a 25% tariff on any country doing business with Iran. His renewed criticism of the Federal Reserve and its independence further added to uncertainty, keeping markets on edge.
Rising food and housing costs pushed the Consumer Price Index up by 0.3% last month, taking the annual inflation rate to 2.7%. Core CPI increased by 0.2% in December. The figures matched forecasts and strengthened the view that the central bank may have room to ease policy later this year.
“These numbers support the idea that inflation pressures are cooling and that the Fed could move toward rate cuts in 2026,” said Gene Goldman, chief investment officer at Cetera Investment Management.
U.S. equities reflected the cautious mood. The Dow Jones Industrial Average dropped 0.67% to 49,256.12, the S&P 500 slipped 0.26% to 6,958.83, and the Nasdaq Composite edged down 0.18% to 23,691.39.
JPMorgan kicks off U.S. bank earnings
Shares of JPMorgan Chase initially climbed after the largest U.S. lender posted fourth-quarter profits that exceeded analyst expectations. However, the stock later fell as much as 3% in volatile trading after the bank warned that a proposed cap on credit card interest rates could hurt consumers and slow the wider economy.
More major earnings reports are due later this week, including results from Bank of New York Mellon, Citigroup, and Bank of America. Several banks have cautioned that the proposed rate cap could limit access to credit for millions of U.S. households and small businesses.
In currency markets, traders appeared to have braced for higher inflation, according to Eric Theoret, a currency strategist at Scotiabank. Risk-sensitive currencies such as the Australian dollar strengthened following the report.
The dollar index, which tracks the greenback against major peers including the yen and the euro, was last up 0.19% at 99.06. The euro slipped 0.1% to $1.1655. The dollar had risen late last week after strong U.S. jobs data suggested the Fed may wait beyond its January meeting before delivering further rate cuts.
Climbing the “wall of worry”
Global markets have entered 2026 facing multiple geopolitical flashpoints, including tensions linked to Iran, Greenland, and Venezuela. These risks have added to concerns over elevated equity valuations across major markets in New York, London, Tokyo, and Frankfurt.
Despite this backdrop, investors appear willing to keep pushing markets higher, a phenomenon often described as “climbing the wall of worry.”
“That wall has been rebuilt in countless ways over the past week, yet markets keep moving higher,” said Chris Beauchamp, chief market strategist at IG.
Concerns have also intensified around Trump’s continued pressure on Jerome Powell. Three former Fed chairs issued a joint statement warning that political interference with central bank independence is more common in emerging economies and can have damaging consequences for inflation.
Oil prices rose to multi-week highs as fears grew that Iran’s crude exports could decline amid tighter crackdowns on anti-government protests. Those concerns temporarily overshadowed expectations of increased supply from Venezuela following U.S. intervention that led to the removal of Nicolas Maduro.
U.S. crude climbed 2.67% to $61.09 per barrel, while Brent crude gained 2.55% to $65.50 a barrel, reflecting renewed geopolitical risk premiums in energy markets.
