US Stocks Poised for Steep Retreat Amid Tech Concerns and Political Tensions

US stocks were poised for a steep retreat from record highs on Wednesday, as techs came under dual pressure from worries about US export curbs on China and Donald Trump’s stance on Taiwan.

Futures on the tech-heavy Nasdaq 100 (NQ=F) led declines, down 1.2%, while S&P 500 futures (ES=F) sank 0.7%. Dow Jones Industrial Average futures (YM=F) slid roughly 0.2% after the blue-chip index surged 700 points on Tuesday to wrap up an all-time high.

Stocks are pulling back as concerns about risks to tech names eclipse the high hopes for interest-rate cuts that have fueled the rally in recent days. Those worries weighed on chipmakers and other stocks whose AI-fueled gains have helped propel the S&P 500 to fresh record highs this year, with Nvidia (NVDA) down over 3% in pre-market trading.

The Biden administration has told allies it’s looking at imposing tougher restrictions on companies still making advanced chip technology available to China despite existing export curbs, Bloomberg reported. Shares of ASML (ASML, ASML.AS), cited as a potential target, dropped roughly 7% after the Dutch chip gear maker posted solid quarterly earnings.

Meanwhile, presidential candidate Trump questioned US defense support for Taiwan in a Bloomberg interview, suggesting the island claimed by China should pay for US protection. Chipmaker TSMC’s (TSM, 2330.TW) shares fell over 3% in pre-market trading in New York, having erased close to $30 billion in market value in Taiwan as stocks there slipped.

A fresh batch of corporate results could turn the tide, given quarterly earnings across multiple sectors have come in better than expected in the season’s early days. Johnson & Johnson (JNJ), United Airlines (UAL), and Discover (DFS) are on Wednesday’s docket.

Also on deck are data on housing starts and industrial production, plus the release of the Federal Reserve Beige Book that could provide inputs for investors calculating the odds of a second rate cut in 2024.

In other news, the BofA monthly fund manager survey is out, and it’s the latest piece of Wall Street insight putting forward the potential for an election sweep in November. Some key findings include 77% thinking a sweep would lead to higher bond yields, 52% believing it would lead to a higher US dollar, and 48% seeing it as positive for US stocks.