Trump policy doubts, weak inflation to weigh on Wall Street

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[August 17, 2017]  By Sruthi Shankar

(Reuters) - Wall Street was set to open lower on Thursday as minutes from the Federal Reserve's July meeting showed growing concerns over weak inflation, while investors worried about President Donald Trump's ability to pursue his pro-growth policies.

Indexes closed off their highs on Wednesday following Trump's decision to disband two business councils after several chief executives quit in protest over his remarks on white nationalists.

"I think it creates concern. Now, you will have to question what the administration will be able to do going forward to implement any kind of policy," said Bob Phillips, managing principal at Spectrum Management Group.

Weak inflation has spurred concerns that the Fed may have to cool its monetary tightening pace even though the economy is growing moderately and the unemployment rate is at a 16-year low.

The central bank is also considering reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities.

"The Fed beginning to reduce its balance sheet will cause some upward pressure on interest rates and the Fed won't probably see a need to raise rates once more this year. That's my gut feeling," Phillips said.

Officials have been priming markets for a probable move at their next policy meeting on Sept. 19 and 20. New York Fed President William Dudley said earlier the expectation of such an announcement next month was not unreasonable.

At 8:30 a.m. ET (1230 GMT), Dow e-minis <1YMc1> were down 65 points, or 0.3 percent, with 20,455 contracts changing hands.

S&P 500 e-minis <ESc1> were down 7.75 points, or 0.31 percent, with 150,712 contracts traded.
 

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., May 25, 2017. REUTERS/Brendan McDermid

Nasdaq 100 e-minis <NQc1> were down 32 points, or 0.54 percent, on volume of 35,125 contracts.

Investors will also be focusing on Dallas Fed President Robert Kaplan and his Minneapolis counterpart Neel Kashkari, who are speaking at different events later in the day.

Kaplan, a centrist voter on policy this year, will discuss how much inflation weakness he is willing to tolerate before putting additional rate-hike plans on hold.

Data showed the number of Americans filing for unemployment benefits fell to a near six-month low last week, pointing to a further tightening in the labor market.

Initial claims for state unemployment benefits fell to 232,000, while economists polled by Reuters had forecast claims dropping to 240,000.

Shares of Wal-Mart <WMT.N> were down about 3 percent in premarket trading after the retail giant reported a quarterly margin drop as it continued to cut prices and invest in its e-commerce operations.

Alibaba's <BABA.N> shares were on track to open at a record high after the e-commerce firm's revenue beat estimates, helped by growth in online sales.

Cisco <CSCO.O> was off about 3 percent following the company's revenue miss in its closely-watched security business.

L Brands <LB.N> was down more than 5 percent following its quarterly forecast that fell below expectations.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D'Silva)

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