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Financial Markets                      02/11 09:49

   

   NEW YORK (AP) -- U.S. stocks are slipping Tuesday following President Donald 
Trump's latest escalation against the United States' trading partners with 
tariffs.

   The S&P 500 was edging down by 0.2% in the U.S. stock market's first trading 
since Trump announced 25% tariffs on all foreign steel and aluminum coming into 
the country. The Dow Jones Industrial Average was down 93 points, or 0.2%, as 
of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.3% lower.

   The losses were only modest, though, and moves were similarly restrained in 
the bond market, where Treasury yields rose by a bit.

   The threat of a possible trade war is very real. Most of Wall Street agrees 
that substantial and sustained tariffs would push up prices for U.S. households 
and ultimately lead to big pain for financial markets. Trump's announcement 
late Monday on steel has already triggered a response from the chief of the 
European Union, Ursula von der Leyen, who said Tuesday, "Unjustified tariffs on 
the EU will not go unanswered -- they will trigger firm and proportionate 
countermeasures."

   But Trump has shown he can be quick to pull back on such threats, like he 
did with 25% tariffs he had announced for all imports from Canada and Mexico, 
suggesting they may be merely a negotiating chip rather than a true long-term 
policy. That has much of Wall Street hoping the worst-case scenario may not 
happen and waiting to see justification for that hope.

   "The metal tariffs may serve as negotiating leverage," and Trump's team may 
be trying to accelerate a renegotiation of the trade agreement that covers the 
United States, Mexico and Canada, according to Solita Marcelli, chief 
investment officer, Americas, at UBS Global Wealth Management.

   In the meantime, much of Wall Street's focus on Wednesday will be on a 
different part of Washington. Federal Reserve Chair Jerome Powell is set to 
give testimony on Capitol Hill, and the hope is that he will give clues about 
what the Fed's plans are with interest rates.

   The Fed cut its main interest rate sharply through the end of last year, 
hoping to give a boost to the job market and the overall economy. But worries 
about inflation potentially staying stubbornly high have helped force the Fed 
and traders alike to cut back their expectations for how many cuts to rates may 
arrive in 2025. Some traders are even betting on the possibility of zero, in 
part because of worries about the effects of tariffs.

   Higher rates tend to put downward pressure on prices for stocks and other 
investments, while tapping the brake on the economy by making borrowing more 
expensive. That could be risky for a U.S. stock market that critics say already 
looks too expensive after running to repeated records in recent years. The most 
recent all-time high for the S&P 500 came late last month.

   One way companies can offset such downward pressure on their stock prices is 
to deliver stronger profits. And big U.S. companies have mostly been doing that 
this earnings reporting season, as they show how much profit they made during 
the last three months of 2024. That, though, hasn't always been enough.

   Marriott International fell 3.9% even though it reported a better profit for 
the latest quarter than analysts expected. Investors focused instead on its 
forecasted range for an important underlying measure of profit this upcoming 
year, which fell short of what analysts were expecting.

   Helping to limit the market's losses was DuPont, which climbed 4.7% after 
the chemical company reported better profit than Wall Street expected. The 
Delaware company said its results were helped by strong demand in its 
electronics business, which it is spinning off later this year.

   Coca-Cola rose 3.7% after reporting stronger profit and revenue than 
analysts expected. Growth in China, Brazil and the United States helped lead 
the way.

   In the bond market, the yield on the 10-year Treasury rose to 4.53% from 
4.50% late Monday. The two-year Treasury yield, which moves more closely with 
expectations for upcoming action by the Fed, climbed less. It edged up to 4.29% 
from 4.28%.

   In stock markets abroad, indexes were mixed across Europe and Asia. Hong 
Kong's Hang Seng fell 1.1%, and South Korea's Kospi rose 0.7% for some of the 
bigger moves, while Japanese markets were closed for a national holiday.

   Trump has pressed ahead with 10% tariffs on Chinese goods, while China has 
retaliated by imposing tariffs on U.S. coal and liquefied natural gas products 
as well as crude oil, agricultural machinery and large-engine cars.

   "Beijing's restraint in targeting only a small sliver of U.S. goods is 
deemed to be a deliberately less than proportionate response to avert an 
escalatory tit-for-tat spiral," said Vishnu Varathan, head of macro research at 
Mizuho.

   "Nonetheless, the reality is that U.S.-China trade tensions are set to 
structurally ramp-up, even if a negotiated compromise is the endgame for Trump 
2.0 tariffs," Varathan added.

   ___

   AP Business Writers Matt Ott and Zen Soo contributed

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