US open: Stocks on the back foot as Trump rally loses steam

US stock markets edged lower on Tuesday as traders returned to their desks after the long weekend, with earnings season back in focus as the Trump rally ran out of steam and the dollar slipped against the pound.

At 1520 GMT, the Dow Jones Industrial Average fell 0.08% to 19,869.43, the S&P 500 was 0.17% weaker at 2,270.78 and the Nasdaq was down 0.41% to 5,557.34. US markets were closed on Monday for Martin Luther King Jr Day.

Meanwhile, oil prices advanced, underpinned by a weaker dollar. West Texas Intermediate was up 0.69% to $52.99 a barrel, while Brent crude was 0.92% higher at $56.38.

Across the pond, UK Prime Minister Theresa May said Britain would seek to leave the European single market and the customs union of the European Economic Area in order to curb immigration from the EU and forge new trade deals. She also said that the final Brexit deal will be put to a vote in both houses of parliament.

The dollar was down 2.72% versus the pound, 1.01% against the euro and 1.02% versus the yen. The pound had fallen to its lowest level against the dollar since the October ‘flash crash’ on Monday after the Sunday Times said May was set to reveal plans for a ‘hard’ Brexit.

On Tuesday, however, the pound got a boost from May's speech and strong inflation data released earlier in the session.

Lukman Otunuga, research analyst at FXTM, said: “The swift change of events has turned the GBPUSD bullish on the daily charts with prices trading over 350 pips higher from Monday’s three month low as of writing. A decisive breakout and daily close above 1.2350 could encourage a further incline higher towards the next relevant resistance level at 1.2500. A persistently weak dollar created from the rising Trump uncertainties could elevate the GBPUSD higher this week with technical traders carefully observing how prices react to 1.2350.”

President-elect Donald Trump recently said that Brexit would end up a being a “great thing” for Britain and promised a “very quick” trade deal.

Back across the Atlantic, New York Federal Reserve president William Dudley said that a strong greenback would put downward pressure on prices and that inflation was “not a problem”.

He said the risk that the Fed will “snuff out” economic expansion anytime soon seems low because “inflation is simply not a problem” and that the pressure on labour resources was increasing “quite slowly".

"The recent strengthening of the dollar will put downward pressure on import prices and limit the ability of domestic producers to raise their prices," he said.

On the data front, the Empire State manufacturing index came in at 6.5 in January from 7.6 in December, suggesting that business activity in the Big Apple grew modestly. This was below the 8.5 expected.

In corporate news, Morgan Stanley fell 1.8% despite reporting an 83% surge in fourth-quarter earnings, which beat expectations, as it benefited from increased trading after the presidential election. This was the bank’s strongest fourth quarter since the financial crisis.

Elsewhere, United Health gained 7.5% as its fourth-quarter earnings beat analysts’ expectations.

Wal-Mart rose 2.64% after the retail giant said it will create 10,000 US jobs this year, while carmaker General Motors was up 0.75% after announcing it will invest $1bn in the country’s manufacturing sector to make 7,000 jobs.