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By Johann M Cherian and Sukriti Gupta
(Reuters) -Wall Street's main indexes were set to extend recent losses on Tuesday, as investors stayed clear of riskier assets on expectations that President Donald Trump's tariffs on trade partners could intensify a growth-denting global trade war.
At 8:15 a.m. ET, Dow E-minis were down 161 points, or 0.37%, S&P 500 E-minis were down 42 points, or 0.72% and Nasdaq 100 E-minis were down 175 points, or 0.85%.
The CBOE market volatility index edged up 1.48 points after hitting a two-month high at 24.31 in the previous session.
The benchmark S&P 500 logged its biggest one-day drop since mid-December and the Nasdaq closed lower by about 9% from its all-time high on Monday after the U.S. imposed tariffs on imports from Mexico and Canada, and doubled duties on Chinese goods. A standoff between the countries could upend nearly $2.2 trillion in two-way annual trade.
China responded with additional tariffs on U.S. imports and Canada has vowed a response.
Ford and General Motors, that have vast supply chains across north America, slipped about 1.3% each in premarket trading.
Heavyweight megacaps such as Nvidia, Microsoft and Meta also lost between 1.6% and 3%.
Illumina fell 4% after China banned imports of genetic sequencers from the medical equipment maker, just minutes after Trump's tariff announcement.
U.S.-listed shares of Chinese companies Bilibili and JD.com rose 3.5% and 2%, respectively, rebounding from Monday's losses.
"There are concerns that (tariffs are) going to put a lot of pressure on the economy and the markets overall," said Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report.
"Sectors that will be hit the hardest would probably be the industrial sector because they're very cyclical, the small caps ... and then (the highly valued) tech stocks."
Investors are pricing in that the surcharges will fan inflation pressures, dampen demand and eat into corporate profits at a time when recent data has resurfaced expectations of a stalling economy. Futures tracking the domestically focused small-caps Russell 2000 index fell 1%.
Morgan Stanley estimates that tariffs on imports from Mexico, Canada and China through 2026 could reduce earnings for the S&P 500 by 5% to 7%.
Executives are also holding back on investments and expenditures as they wait for more clarity on Trump's upcoming policies. Analysts say April 1 will be the date when the president is likely to announce his full-fledged global trade policy.
Interest rate futures point to the Federal Reserve delivering at least three 25 basis points interest rate cuts by December, up from about two on Monday, as traders bet on the likelihood that slowing growth could nudge the central bank to lower borrowing costs.