Profit Taking, Tariff Concerns May Lead To Pullback On Wall Street

The major U.S. index futures are currently pointing to a modestly lower open on Wednesday, with stocks likely to move back to the downside after ending yesterday’s choppy trading session slightly higher.

Profit taking may contribute to an initial pullback on Wall Street after yesterday’s slim gains lifted the S&P 500 to a new record closing high.

Lingering concerns about a global trade war may also weigh on the markets after President Donald Trump said he plans to impose tariffs on U.S. imports of automobiles, pharmaceuticals and semiconductors.

Trump said the 25 percent tariffs could be imposed as early as April 2nd and warned the duties could “go substantially higher over a course of a year.”

However, overall trading activity may be somewhat subdued, as traders look ahead to the release of the minutes of the Federal Reserve’s latest monetary policy meeting this afternoon.

The minutes of the Fed’ January meeting, when the central bank decided to leave interest rates unchanged following three straight rate cuts, could shed additional light on the outlook for rates.

Stocks showed a lack of direction throughout much of the trading session on Tuesday, extending the lackluster performance seen during last Friday’s session. The major averages moved to the upside going into end the day, however, with the S&P 500 reaching a new record closing high.

The major averages all posted modest gains on the day. The S&P 500 rose 14.95 points or 0.2 percent to 6,129.58, the Nasdaq inched up 14.49 points or 0.1 percent to 20,041.26 and the Dow crept up 10.26 points or less than a tenth of a percent to 44,556.34.

The choppy trading on Wall Street came as some traders remained on the sidelines following the Presidents’ Day holiday on Monday.

Traders may also have been expressing some uncertainty about the outlook for markets after last week’s strong gains lifted the Nasdaq and the S&P 500 back within striking distance of their record highs.

Last week’s gains came after President Donald Trump signed a memorandum calling on members of his administration to review plans for reciprocal tariffs on U.S. trade partners but stopped short of imposing the tariffs.

On the U.S. economic front, a report released by the Federal Reserve Bank of New York showed a turnaround by regional manufacturing activity in the month of February.

The New York Fed said its general business conditions index jumped to a positive 5.7 in February from a negative 12.6 in January, with a positive reading indicating growth. Economists had expected the index to climb to a negative 1.0.

Meanwhile, the report said optimism about the outlook for conditions over the next six months dropped significantly, with the index for future business activity slumping to 22.2 in February from 36.7 in January.

A separate report released by the National Association of Home Builders showed homebuilder confidence in the U.S. has unexpectedly deteriorated in the month of February.

The report said the NAHB/Wells Fargo Housing Market Index slumped to 42 in February after inching up to 47 in January. Economists had expected the index to come in unchanged.

Computer hardware stocks showed a substantial move to the upside on the day, driving the NYSE Arca Computer Hardware Index up by 3.7 percent to a record closing high.

Significant strength was also visible among steel stocks, as reflected by the 2.0 percent jump by the NYSE Arca Steel Index. With the upward move, the index reached its best closing level in over two months.

Semiconductor stocks also moved notably higher over the course of the session, with the Philadelphia Semiconductor Index climbing by 1.7 percent to a record closing high.

Gold, airline and pharmaceutical stocks also saw considerable strength on the day, while retail stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are climbing $0.77 to $72.62 a barrel after jumping $1.11 to $71.85 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,957.10, up $8.10 compared to the previous session’s close of $2,949. On Tuesday, gold spiked $48.30.

On the currency front, the U.S. dollar is trading at 151.73 yen compared to the 152.06 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0428 compared to yesterday’s $1.0446.

Asia

Asian stocks ended mixed on Wednesday amid lingering tariff concerns and tense Russia-Ukraine negotiations.

The U.S. dollar held firm and gold hovered near record levels, while oil extended gains for a third straight session amid worries of oil supply disruptions in the U.S. and Russia.

China’s Shanghai Composite Index jumped 0.8 percent to 3,351.54 despite comments from U.S. President Donald Trump that the U.S. may impose tariffs of around 25 percent on pharmaceutical, automobile, and semiconductor imports. Hong Kong’s Hang Seng Index edged down 0.1 percent to 22,944.24.

Japanese markets ended slightly lower after the release of mixed economic data, with exports rising 7.2 percent year-on-year in January, while core machinery orders, a key indicator of capital spending, unexpectedly declined in December.

The Nikkei 225 Index dipped 0.3 percent to 39,164.61 as policy board member Hajime Takata called for gradual rate hikes to mitigate the risk of rising prices and financial market overheating. The broader Topix Index settled 0.3 percent lower at 2,767.25.

Automakers Toyota, Honda Motor and Nissan fell around 2 percent each. Tech heavyweight SoftBank dropped 1.9 percent and Uniqlo operator Fast Retailing gave up 2.1 percent.

On the positive side, Advantest rose about 1 percent and Tokyo Electron jumped 3.5 percent.

Seoul stocks rose for the seventh consecutive day, with the Kospi jumping 1.7 percent to 2,671.52, led by technology stocks.

Samsung Electronics rallied 3.2 percent and SK Hynix surged over 4 percent after reports emerged that Broadcom and TSMC are eyeing Intel’s chip-design and manufacturing businesses.

Australian markets fell notably as data showed wages rose at the slowest annual pace in more than two years in the fourth quarter.

The benchmark S&P/ASX 200 Index dropped 0.7 percent to 8,419.20, while the broader All Ordinaries Index ended down 0.7 percent at 8,699.10.

National Australia Bank shares plunged 8.1 percent. The country’s biggest business lender said that higher credit impairments against business loans contributed to a small fall in its unaudited December quarter cash earnings.

New Zealand shares slipped, with the benchmark S&P/NZX-50 Index closing down 0.1 percent at 13,033.36 after the country’s central bank delivered a super-sized interest rate cut, as widely expected, and signaled further reductions in 2025.

Europe

European stocks have moved back to the downside during trading on Wednesday after closing at a record high in the previous session. Yields on euro zone bonds ticked higher for the fourth day, keeping investors on edge.

Meanwhile, U.S. President Donald Trump continued his aggressive stance on trade, reiterating that America will impose reciprocal tariffs on trading partners that would be “no more, no less” than those levied by other countries.

The pound sterling was moving higher after data showed U.K. consumer price inflation rose more than expected to a 10-month high in January.

The consumer price index logged a 3.0 percent jump in January following December’s 2.5 percent increase. This was the fastest growth since March 2024, while analysts had forecast prices to climb 2.8 percent.

The German DAX Index is down by 1.2 percent, the French CAC 40 Index is down by 0.8 percent and the U.K.’s FTSE 100 Index is down by 0.6 percent.

MTU Aero Engines AG has tumbled. The German engine manufacturer reported a decline in its fourth quarter net income to 143 million euros from 215 million euros in the same quarter last year.

Commodities giant Glencore slumped has also shown a significant move to the downside after posting lower earnings last year.

Philips has also plummeted as the Dutch medical device maker reported wider-than-expected losses in 2024.

HSBC has also fallen. The lender posted full-year revenue of $65.85 billion, slightly lower than $66.1 billion in 2023.

U.S. Economic News

After reporting a substantial increase by new residential construction in the U.S. in the previous month, the Commerce Department released a report on Wednesday showing housing starts pulled back by more than expected in the month of January.

The Commerce Department said housing starts plunged by 9.8 percent to an annual rate of 1.366 million in January after soaring by 16.1 percent to an upwardly revised rate of 1.515 million in December.

Economists had expected housing starts to tumble by 6.6 percent to an annual rate of 1.400 million from the 1.499 million originally reported for the previous month.

The sharp pullback came a month after housing starts surged to their highest level since hitting an annual rate of 1.546 million in February 2024.

Meanwhile, the report said building permits inched up by 0.1 percent to an annual rate of 1.483 million in January after falling by 0.7 percent to a slightly downwardly revised rate of 1.482 million in December.

Building permits, an indicator of future housing demand, were expected to slump by 1.6 percent to an annual rate of 1.460 million from the 1.483 million originally reported for the previous month.

The Treasury Department is scheduled to announce the results of this month’s auction of $16 billion worth of twenty-year bonds at 1 pm ET.

At 2 pm ET, the Federal Reserve is due to release the minutes of its January monetary policy meeting, when the central bank decided to leave interest rates unchanged following three straight rate cuts.

Federal Reserve Vice Chair Philip Jefferson is scheduled to speak on “Household Balance Sheets” at a Martin H. Crego Lecture in Economics event hosted by Vassar College at 5 pm ET.