By Sara Sjolin, MarketWatch
Dollar falls to September lows
U.S. stocks were set for a mixed open on Tuesday, with futures struggling for direction as traders returned from the New Year's holiday with few fresh catalysts to steer the markets.
With only one major economic data release on deck on Tuesday, investors instead turned their attention to the continued dollar slump and geopolitical concerns over Iran and North Korea.
What are stock futures doing?
Futures for the Dow Jones Industrial Average rose 3 points to 24,738, while those for the S&P 500 index gained 1.50 points to 2,677.50. Futures for the Nasdaq-100 index dropped 4 points to 6,404.76.
The small moves come after all three benchmarks declined on Friday in 2017's last trading session . The indexes, however, still scored stellar gains for the year, with the S&P 500 ending 2017 19.4% higher, the Dow average rising 25.1% and the Nasdaq Composite climbing 28.2%. All three posted their best year since 2013.
What's driving the market?
There were few catalysts to steer the stock markets on Tuesday, and the dollar grabbed the limelight instead.
The ICE U.S. Dollar Index fell for a fifth straight session, down 0.3% at 91.836 to trade around its lowest level since September. The weakness came as investors started to wonder whether the major U.S. tax reforms agreed in December will significantly boost economic growth and inflation, and to consider how they will affect the future path of interest rates.
Outside the U.S., Iran was in focus after nine people were reported dead after overnight clashes between protesters and security forces. The protests started last week over rising inflation and corruption, but focus has since shifted to a wider discontent with Iran's ruling system and Supreme Leader Ayatollah Ali Khamenei. The wave of unrest is now seen as the largest since a disputed 2009 presidential election.
In North Korea, leader Kim Jong Un said in a speech on Monday that Pyongyang had completed its nuclear weapons program , which could reach any point in the continental U.S. Kim, however, also suggested he is willing to engage in talks with South Korea, saying North Korea would be open to sending a delegation to the Winter Olympics in the South next month.
The government in Seoul welcomed Kim's suggestion on Tuesday. Its unification minister proposed holding high-level talks with North Korean officials on Jan. 9 to discuss the country's possible involvement in the Winter Games and Kim Jong-Un's nuclear program.
What are strategists saying?
"It seems that the initial market excitement witnessed during early Q4 of 2017 over U.S. tax reforms has diminished, while concerns remain elevated over stubbornly low inflation levels," said Lukman Otunuga, research analyst at FXTM, in a note.
"Although sentiment remains bullish towards the U.S. economy amid the improving economic conditions, investors seem more concerned with tax reforms and rate hike expectations. While the dollar was initially supported by the prospect of tax cuts being implemented, bulls may take a pause as investors investigate whether the cuts will lift growth materially in the longer run," he added.
What economic updates are coming?
On a light economic calendar, the U.S. manufacturing purchasing manager's index for December is the only major report scheduled for release. The data are due to come out at 9:45 a.m. Eastern Time.
There are no Federal Reserve officials scheduled to speak publicly.
What are other markets doing?
Stock markets in Asia closed mainly higher, while European equity markets kicked off the new year on the back foot.
Oil prices declined, with West Texas Intermediate crude falling from its highest level since June 2015 that was reached on Friday.
Metals were mixed. Gold rose 0.4%, while copper fell 0.4%.
Bitcoin futures lost 5.2% to $13,715.