Wall Street slips as policy uncertainty hits financials; ASX set to open near flat

US sharemarkets finished lower overnight, retreating from recent record levels as investors weighed fresh political uncertainty against a steady economic backdrop. The S&P 500 slipped 0.19% to 6,963.74, while the Dow Jones Industrial Average fell 398 points, or 0.8%, to 49,191.99. The Nasdaq Composite eased 0.1% to 23,709.87. The pullback followed a record-setting session that had seen both the S&P 500 and Dow close at all-time highs, with small caps also touching new peaks.

The banking sector was a clear drag on the market. JPMorgan Chase dropped more than 4% despite reporting quarterly earnings that exceeded expectations at both the revenue and profit lines. Strength in overall trading revenue, including equities, was offset by weaker-than-expected investment banking fees, prompting investor caution. Other major financial names also moved lower, with Goldman Sachs declining around 1%, while payment groups Mastercard and Visa were among the worst performers of the session.

The broader financial sector reflected that pressure, with bank and financial exchange-traded funds trading lower as investors reassessed regulatory and policy risks.

Market sentiment was unsettled by a series of policy proposals floated in recent days by Donald Trump. These included calls for a temporary cap on credit card interest rates, restrictions on dividends and share buybacks by defence contractors, and limits on institutional ownership of single-family homes. Concerns also resurfaced around central bank independence after renewed criticism of Jerome Powell, keeping political risk front of mind for investors.

In the technology space, Microsoft shares finished lower after comments linking its data-centre expansion to future utility costs drew attention.

Earlier in the session, markets had found modest support from the December US consumer price index. Core inflation rose 0.2% on the month and 2.6% over the year, both below expectations, while headline inflation increased 0.3% for the month, lifting the annual rate to 2.7% in line with forecasts. Combined with a slightly softer December jobs report, the data reinforced expectations that the Federal Reserve will remain cautious. Futures markets continue to price in two quarter-point rate cuts later this year, beginning around mid-year.

Australian shares are expected to open little changed, with SPI futures down 5 points to 8,779. Locally, job vacancy data is due at 11.30am AEDT. Offshore, attention turns to China’s trade figures, followed by US producer price inflation and retail sales data due early Thursday morning AEDT.