Tariff increases may be pushed back, but bloated market fails to find support

The optimism on Wall Street seems to be running thin on the ground, despite reports emerging that Donald Trump is considering pushing back the March 2nd tariff increases on Chinese imports by as much as two months if this week’s talks continue to go well. This news has helped reverse yesterday’s post-market sell-off for US index futures, but given the significance of the call, this may have the potential to deliver further gains in the near term.

Yesterday’s budget deficit data may have flagged some concerns over the too-generous tax breaks that have been given to US businesses, although with no suggestion that fiscal policy will need to be reversed quickly, the market hasn’t seen any real need to panic here. December Retail Sales will be in focus before the opening bell as these could illustrate a dip into negative territory, again highlighting how the feel-good effect of previous tax breaks on consumers is now running thin. With fuel prices driving inflation down, discretionary spending ought to be rising, but if consumers are seeing storm clouds ahead, again this could be case for a degree of profit taking from the recent bumper gains for equities.

Ahead of the open we’re calling the DOW up 32 at 25575 and the S&P up 4 at 2757.