Market snapshot: momentum trades run out of steam   

Several momentum trades were reversed in a slightly shifting landscape, with the dollar advancing but tech stocks and gold retreating sharply.

• Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

The dollar found new friends as a de-escalation of tensions with Iran and the possibility that a government shutdown could be averted lifted the currency. There was also a positive greenback reaction to the likely appointment of Kevin Warsh as the new Federal Reserve Chair, while rising Treasury yields also lent some support.

Given the dollar’s inverse relationship with gold, the precious metal declined by around 4% after its recent breathless run. The move away from the dollar “debasement” trade, which was previously showing signs of becoming entrenched, was something of a surprise to investors who have been actively seeking haven alternatives.

• 10 shares to give you a £10,000 annual income in 2026
• Investment outlook: expert opinion, analysis and ideas

In the tech space, Microsoft Corp (NASDAQ:MSFT)’s disproportionate effect on the S&P500 and Nasdaq was in plain sight as the group tumbled by 10% after posting soft guidance on the outlook for the current quarter and slowing cloud growth in the last. Tesla Inc (NASDAQ:TSLA) was also in the crosshairs as its numbers fell short of the corresponding period last year, even though the numbers beat expectations. More broadly, a large software sector tracker fell by 5%, taking it into bear market territory and more than 20% down from its recent high.

More positively, Meta Platforms Inc Class A (NASDAQ:META) rose by more than 10% after a beat on its first-quarter sales forecast, and industry bellwether Caterpillar Inc (NYSE:CAT) also gained by over 3% after sailing past market estimates for its fourth quarter. Oil stocks will come into sharp focus later as Exxon Mobil Corp (NYSE:XOM) and Chevron Corp (NYSE:CVX) report, with the recent volatility of the commodity and the developments in Venezuela, Cuba and Iran likely to feature in current and outlook comments.

• BT, Vodafone and BAT to reward income investors in February
• Lloyds Bank’s annual results: Black Horse returns to form

In the meantime, the dialling back of the momentum trades has weighed on the main indices although each remain in positive territory. In the year to date, the Dow Jones is currently ahead by 2.1%, the S&P500 by 1.8% and the Nasdaq by 1.9% although the smaller cap Russell 2000 index continues to attract buying interest with a 6% gain so far.

Renewed interest in the banks following a strong full-year opener from Lloyds Banking Group (LSE:LLOY) yesterday and the news that Experian (LSE:EXPN) is launching a $1 billion share buyback programme were positive drivers, but scarcely enough to offset an inevitably weak showing from the miners. Antofagasta (LSE:ANTO) was worst hit with a decline of over 5%, while the poster children of the gold rush, Endeavour Mining (LSE:EDV) and Fresnillo (LSE:FRES), succumbed to 4% falls.

• Ask ii: should I switch my ISA savings into my pension?
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

Nonetheless, the FTSE100 move was contained in comparison to some of the volatility experienced by other asset classes, and the premier index remains ahead by 2.4% so far this year.

Meanwhile, the FTSE250 has shown some extra strength with a gain of 3.6% in the first trading month this year, helped in part by a domestic economy which has displayed some signs of stubborn resilience.