US pre-open: Stocks set for more losses as Trump optimism fades
US stocks looked set for further losses on Wednesday as investors grow increasingly sceptical that President Donald Trump will be able to deliver on his promised tax cuts to boost business.
At 1100 GMT, Dow Jones Industrial Average futures were down 0.2%, while S&P 500 and Nasdaq futures were off 0.1%.
On Tuesday, the three main indices suffered their worst losses since September last year, with the Dow ending down 1.1%, the S&P 1.2% and the Nasdaq 1.8%. Banking stocks, which have benefitted from hopes that Trump will scale back bank regulation, took the biggest beating.
Meanwhile, oil prices retreated after data on Tuesday from the American Petroleum Institute showed US inventories rose by 4.5m barrels to 533.6m last week, which was higher than the 2.8m jump forecast. West Texas Intermediate and Brent crude were down 1.5% to $47.52 a barrel and $50.19, respectively.
Data from the Energy Information Administration on oil stocks is due at 1430 GMT.
Investors were also worried about whether Trump will be successful in repealing Obamacare given his intention to divert the programme's funding to his governmental spending agenda, ahead of a congressional vote this week on healthcare policy.
Neil Wilson, senior market analyst at ETX Capital, said: "Traders seem to be reassessing the Trump trade. Will he deliver on the promise that has fuelled the gains since November? It does appear that the optimism has gone to some extent as the president seems to be mired in a Congressional swap, but we saw this happen before – in December following the Fed’s rate hike there was a softening in equities before launching another ascent, although it was not quite the +1% drop witnessed yesterday.
"Has the Trump rally died? Ignoring all the noise, it might just be that the old ‘3 steps and stumble’ rule can be applied. This simply argues that the US stock market tends to suffer a substantial or even serious shock – e.g. a bear market - when the Fed raises rates three times in succession without an intervening cut."
In corporate news, Nike fell sharply in pre-market trade after it issued a downbeat outlook for sales growth late on Tuesday.
Chemicals maker PPG Industries was a touch higher in pre-market trade after Dulux owner AkzoNobel rejected a second offer from the company.
The data calendar was looking pretty light, with existing home sales at 1400 GMT the only major release.