By Johann M Cherian and Purvi Agarwal
(Reuters) -The benchmark and the Nasdaq were set to build on recent gains on Tuesday, as investors parsed Donald Trump’s tariff pledges on top trade partners of the U.S. and awaited minutes from the Federal Reserve’s latest meeting.
President-elect Trump said he would impose a 25% conditional tariff on Canadian and Mexican imports that could violate a free-trade deal he negotiated during his previous term. He also outlined “an additional 10% tariff, above any additional tariffs” on imports from China, raising the risk of trade wars.
At 8:32 a.m. ET, Dow E-minis were down 140 points, or 0.31%, S&P 500 E-minis were up 13.25 points, or 0.22% and E-minis were up 54.5 points, or 0.26%.
Automakers such as Ford (NYSE:) and General Motors (NYSE:) -that have highly integrated supply chains across Mexico, the U.S. and Canada – lost 2.2% and 4.7%, respectively in premarket trading.
However, some analysts said that the threats might just be used as a negotiating tool.
“At this point it’s probably too early to tell. But I don’t think it’s something that is over and I wouldn’t be shocked if we turn the new year and all of a sudden this becomes a big issue,” said Joe Saluzzi, co-head of equity trading at Themis Trading.
Yields on longer-dated Treasury bonds, that had slipped in the previous session following Scott Bessent’s selection as incoming Treasury secretary, rose and kept a lid on equities’ gains.
The S&P 500 touched a record high on Monday and logged its sixth-straight session of gains. Investors also rotated into small-cap companies, that helped the index scale an all-time high, surpassing the previous record hit three years ago.
On Tuesday, futures tracking the Russell dropped 0.4%.
On the data front, a consumer confidence survey is due at 10:00 a.m. ET and post-noon markets will assess minutes from the central bank’s meet earlier this month which could throw light on the Fed’s outlook on interest rate cuts. Top on the radar this week is the personal consumption expenditure report due on Wednesday.
Analysts say Trump’s trade and fiscal policies, though seen as a positive for companies and economic growth, could stoke inflation pressures and slowdown the Fed’s monetary policy easing cycle.
Minneapolis Federal Reserve President Neel Kashkari, typically seen as hawkish on monetary policy, said he is open to cutting interest rates again next month.
Traders have recently swayed in placing their bets on the central bank’s move in December and currently favor a 25-basis point interest rate cut by a 59.4% chance, as per the CME Group’s (NASDAQ:) FedWatch Tool.
Among others, Wells Fargo (NYSE:) gained 1.4% after Reuters reported the bank’s $1.95 trillion asset cap could likely be lifted next year.
Dow component Amgen (NASDAQ:) lost 11.6% after its experimental obesity drug fell short of expectations. Rival Eli Lilly (NYSE:) rose 4.3% after U.S. President Joe Biden was set to propose expanding Medicare and Medicaid coverage for anti-obesity drugs.
Kohl’s (NYSE:) slid 18.6% after forecasting a bigger drop in annual sales than previously expected.
