Geoffrey Smith 

Investing.com — The selloff in  U.S. equities looks set to resume at the open, despite Monday’s violent short squeeze. Microsoft (NASDAQ:), Johnson & Johnson (NYSE:) and General Electric Nvidia (NASDAQ) will drop plans to acquire ARM. The Federal Reserve starts a two-day policy session to make German businesses less grim. What you need to know for financial markets Tuesday, 25 January.

1. Stocks in the United States will open lower as rebound fades

Monday’s late rally may prove to have been nothing but a head fake. The overnight session saw stock futures fall again after Monday’s violent short squeeze.

They were 0.4% down at 6:15 am ET and 0.4% down at 0.8%. And they were 1.3% down at 6.3% AM ET. That more than wipes out the net gains from Monday’s session, although it’s nowhere near the intraday lows seen in the first couple of hours of trading.

The market’s big test later will come from the corporate earnings roster, which starts with Johnson & Johnson, General Electric, American Express (NYSE:), Archer-Daniels-Midland and defense giants Raytheon (NYSE:) and Lockheed Martin (NYSE:).

But the true test of sentiment comes after the closing, when Microsoft or Texas Instruments (NASDAQ) will need to defend their current high valuations.

2. Fed meeting will begin; Conference Board and Richmond Fed updates

The data calendar is, however, quite light with most of the interesting updates coming out of the housing sector. There’ll be the national house price data along with the S&P/Case-Shiller assessments of prices in November at 9 AM ET (1400 GMT).

In addition, there are the regular updates from Redbook Research at 8:55 AM ET and the Conference Board’s Consumer Confidence survey at 10 AM ET, along with the Richmond Federal Reserve’s monthly business survey.

The day’s big macro event isn’t actually an event until Wednesday, of course. Two days later, the Federal Reserve begins its policy meeting. It isn’t expected to change its monetary policy stance, but that won’t stop intense scrutiny of its forward guidance.

3. Nvidia ‘set to drop ARM takeover’

Texas Instruments will provide the major update on the chipmaking sector shortly, but there are still other developments.

Nvidia appears to be preparing to cancel its deal for $40 billion to purchase U.K.-based chip designer company ARM (OTC:). It has concluded that it is likely to be killed by various regulators.

Both the U.S. antitrust regulators and China’s are opposed to the deal. The U.K. is also facing a national security review.

Bloomberg News reports that Softbank is currently preparing for an IPO of ARM.

4. German confidence in business grows

It’s not hard to believe that German businesses are beginning to see the light at the end. After falling for five months, Ifo Business Climate Index index gained some ground in January. Companies reported an improvement in supply chain bottlenecks.

This index reached 95.7 which was higher than the expected 94.7. While the ‘current conditions’ assessments deteriorated a little, there was a clear increase in the ‘expectations’ component.

Volkswagen (DE:), which was hit hard by shortages of chip supplies, reported significant sales drops last year. The data on new orders and industrial production in the closing months of 2013 also disappointed. The Deutsche Bundesbank said yesterday that Europe’s largest economy probably shrank in the fourth quarter.

5. Supply concerns outweigh market volatility, pushing oil higher

The reality of scarcity and concerns over volatility in risk assets outweighed the fact that crude oil prices increased.

At 6:45 AM ET futures had risen 0.6% to $83.77/barrel, and 0.7% to $86.00/barrel

As usual, at 4:30 PM the American Petroleum Institute releases its weekly U.S. inventory data. Market participants will examine whether or not a three-week run of gasoline stockpile increases is broken.