A look at the day ahead in U.S. and global markets from Mike Dolan
Hit by draining consumer and business confidence amid uncertainty about Washington's economic policies, Wall Street stock indexes are all tripping into the red for 2025 - with the slide stalling for now, awaiting megacap Nvidia's earnings today.
The latest sideswipe from main street has unnerved stock, bond and credit markets across the piece.
U.S. consumer confidence deteriorated at its sharpest pace in 3-1/2 years in February, with 12-month inflation expectations surging amid worries that tariffs on imports would raise prices for households.
At 8-month lows, it was the third straight monthly decrease in that measure of household sentiment and pushed the index to the bottom of the range that has prevailed since 2022.
But it's just the latest in a series of similar outcomes from consumer, business and housing surveys showing rising levels of anxiety about the blizzard of sometimes conflicting new policy signals from Donald Trump's latest administration.
The gnawing fear is that high levels of uncertainty are making it impossible for firms to plan and invest, dragging on economic activity and hiring, sapping stock prices and further hitting confidence in a risky spiral.
Gauges of U.S. economic uncertainty are now at their highest since the pandemic lockdowns five years ago and global equivalents are at their highest on record, according to the Economic Policy Uncertainty index series.
And U.S. financial markets, which had mostly assumed the Trump presidency would do the opposite for economic confidence, now appear wrongfooted and are rotating portfolios frantically.
On Tuesday, the S&P 500 fell again to its lowest close of the year. The pullback in the big tech was even bigger, led by a pre-earnings 3% slide in Nvidia and a whopping 8% retreat in Elon Musk's auto giant Tesla.
Tesla's market value tumbled below $1 trillion for the first time since November after news of a sales slump in Europe last month amid a series of boycott campaigns due to Musk's political roles. The European Automobile Manufacturers Association reported that Tesla sales dropped 45% in Europe, compared with a 37% jump in overall sales of EVs in Europe.
That's seen the once "Magnificent Seven" of Big Tech mega caps slide deep into the red for 2025, marking an official 'correction' of more than 10% from the record peaks of December.
The wider Nasdaq and small cap Russell 2000 are now down more than 2% for the year so far - a stark contrast to 14-15% gains in Germany's DAX or Hong Kong's Hang Seng.
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Borrowing premiums for U.S. high-yield 'junk' credits rose to their widest in six weeks. Commodity prices fell, with U.S. crude oil hitting its lowest for the year, and risky tokens like Bitcoin plunged.
S&P 500 futures clawed back some of the losses early on Wednesday - awaiting Nvidia's update but also partly due to stepped-up rate cut hopes and overnight tax cut moves in Congress.
Market angst ripped through the bond market on Tuesday as the household survey - which saw jobs readings fall too - stepped up Federal Reserve easing speculation. Futures now price 55 basis points of interest rate cuts for the year, more than Fed policymakers indicated themselves in December, and with an 80% chance the next one comes as soon as June.
Ten-year U.S. Treasury yields plunged below 4.3% for the first time this year and two-year yields fell to their lowest since before November's election - showing another 'Trump trade' gone awry.
U.S. Treasury Secretary Scott Bessent claimed the U.S. economy was "brittle underneath" and vowed to "re-privatize" growth by cutting government spending and regulation.
And the Republican-controlled U.S. House of Representatives late on Tuesday advanced Trump's tax-cut and border security agenda by a slim two-vote margin, delivering a major boost to his 2025 priorities.
But in another jarring take on trade policy, Trump opened yet another front on Tuesday by ordering a probe into potential new tariffs on copper imports to rebuild U.S. production of a metal critical to electric vehicles and military hardware.
Overseas, Europe's stock rally this year - sown mainly by fears that Trump's moves to work with Russia to seek an end to the Ukraine war only increased the region's security risks and defense spending needs - powered on to new record highs. Germany's new government is forming after weekend elections and is seeking to increase fiscal spending, mainly on defence.
Overnight, the U.S. and Ukraine have agreed on the terms of a draft minerals deal central to Kyiv's push to win Washington's support. The contents of the draft agreement said that it does not specify any U.S. security guarantees or continued flow of weapons but says that the United States wants Ukraine to be “free, sovereign and secure.”
In Asia, China's stock rally also continued and Hong Kong jumped another 3% - helped in part by its own artificial intelligence buzz surrounding the DeepSeek development.
Japan bucked the trend, ending in the red on Wednesday as yen strength and a possible interest rate rise there next month rattled it.
Key developments that should provide more direction to U.S. markets later on Wednesday:
* U.S. January new home sales
* G20 finance ministers and central bankers meet in Cape Town
* Richmond Federal Reserve President Thomas Barkin and Atlanta Fed President Raphael Bostic all speak; Bank of England policymaker Swati Dhingra speaks
* US corporate earnings: Nvidia, Salesforce, Paramount Global, eBay, Agilent, Universal Health, Lowe's, Synopsys, First Energy, NRG, TJX, Verisk, APA, Invitation Homes etc
* US Treasury sells $44 billion of 7-year notes, $28 billion of 2-year floating rate notes
(By Mike Dolan, editing by Ros Russell; [email protected])
