Wall Street set for slow start as economic uncertainty weighs

US stock indexes were set for a muted open on Wednesday as a slowing economic recovery and uncertainty over higher taxes weighed on sentiment, even though signs of inflation peaking eased fears of an early cut to monetary stimulus.

The S&P 500 (.SPX) had sunk to a more than three-week low on Tuesday, while the Dow (.DJI) hit a near two-month trough as investors fretted over the potential impact of a tax hike on corporate profits.

While signs of cooling inflation have made early tapering by the Federal Reserve seem unlikely, they have also raised the question of when exactly the bank would begin scaling back its massive pandemic-induced stimulus plan.

Economically sensitive sectors such as energy rose in premarket trading after largely underperforming their peers in the previous session.

But financial stocks, particularly big banks, fell as Treasury yields retreated on expectations of loose monetary policy in the near term.

“It’s just a softening of economic activity, not just in the US but globally ... we still have the COVID Delta variant that’s causing problems in a lot of areas,” said Randy Frederick, managing director of trading and derivatives for the Schwab Center for Financial Research.

“We were at all-time highs just a week-and-a-half ago, the market tends to be sensitive to any kind of news, any kind of bad economic data when it’s at all-time highs.”

US S&P 500 E-minis were up 2.5 points, or 0.06per cent, at 8:12 a.m. ET. Dow E-minis were down 23 points, or 0.07 per cent, while Nasdaq 100 E-minis were up 21.25 points, or 0.14 per cent.

US-listed Chinese stocks extended recent losses, as weak retail sales data pointed to a possible economic slowdown in the mainland.

A growing debt crisis in the country’s No. 2 property developer, China Evergrande Group (3333.HK), has raised fears of a possible impact to major lenders.