US equity futures edged lower late Tuesday, with Dow Jones futures down 0.2%, while S&P 500 and Nasdaq 100 futures slipped modestly, signalling a cautious start ahead of key bank earnings and policy-related developments.
The overnight softness follows a pullback in cash markets after the Dow and S&P 500 closed at record highs on Monday. Despite benign inflation data, investor sentiment turned selective as heavyweight financials and software stocks came under pressure.
Earnings, Policy in Focus
Markets are bracing for earnings from Wells Fargo, Citigroup and Bank of America on Wednesday, following a mixed reaction to JPMorgan Chase’s results. Financial stocks also remain under scrutiny after renewed political commentary around a proposed cap on credit card interest rates, which has weighed on Visa and Mastercard.
Separately, attention is on the US Supreme Court, which could issue an update on President Donald Trump’s tariff-related case as early as Wednesday, though a final ruling may still be weeks away.
Market Recap: Rally Pauses
Tuesday’s session saw the rally lose momentum. The Dow Jones Industrial Average fell 0.8%, dragged down by JPMorgan, Visa and Salesforce. The S&P 500 slipped 0.2%, while the Nasdaq Composite dipped 0.1%. The Russell 2000, however, briefly touched a fresh intraday high, underscoring ongoing strength in select small-cap names.
Core CPI inflation for December held at 2.6%, slightly below expectations, nudging up market bets of a June Federal Reserve rate cut, but that support was offset by earnings-related selling and persistent weakness in software stocks.
AI, Infrastructure Stand Out
Amid the broader consolidation, AI-linked infrastructure stocks continued to attract buying interest. Alphabet (Google) advanced within a buy zone, reinforcing its leadership position among mega-cap AI beneficiaries. Celestica and Comfort Systems also flashed technical buy signals, rebounding after recent volatility.
Aerospace and defence stocks remained among the market’s strongest pockets, while construction firms and data-centre-linked plays—including select bitcoin miners—extended gains.
Rates, Oil, ETFs
US crude oil rose 2.8% to $61.15 per barrel, supporting energy stocks, while the 10-year Treasury yield eased two basis points to 4.17%.
Among ETFs, the Financial Select SPDR (XLF) fell sharply, reflecting pressure on large banks and payment companies. In contrast, energy (XLE) and industrials (XLI) posted gains, while software-focused ETFs continued to underperform.
