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 ( NVDA ) 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 ( NVDA ) 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.

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 ( NVDA ) 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 ( NVDA ), 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])