(Reuters) – U.S. stock index futures edged higher on Wednesday on easing fears of an earlier-than-expected cut to monetary stimulus, even though a slowing economic recovery and uncertainty over higher corporate taxes weighed on sentiment.

FILE PHOTO: People are seen on Wall Street outside the New York Stock Exchange (NYSE) in New York City, U.S., March 19, 2021. REUTERS/Brendan McDermid/File Photo

The S&P 500 had sunk to a more than three-week low on Tuesday, while the Dow hit a near two-month trough as investors fretted over the potential impact of a tax hike on corporate profits.

While signs of slowing inflation have made early tapering by the Federal Reserve seem unlikely, it raised the question of when exactly the bank would begin scaling back its massive pandemic-induced stimulus plan.

Economically sensitive sectors such as energy and financials rose in premarket trading after largely underperforming their peers in the previous session.

Apple Inc rose around 0.4% in premarket trading, after tumbling 1% in the last session on a somewhat lukewarm response to the unveiling of its Phone 13 and a new iPad mini.

U.S. S&P 500 E-minis were up 10.5 points, or 0.24% at 06:25 am ET. Dow E-minis were up 64 points, or 0.19%, while Nasdaq 100 E-minis were up 43.5 points, or 0.28%.

U.S.-listed Chinese stocks extended recent losses as weak retail sales data pointed to a possible economic slowdown in the mainland.

A growing debt crisis in the country’s no.2 property developer, China Evergrande Group, has raised fears of a possible impact to major lenders.

“The Asian banks will get hit hard if there’s a default, but then there will be a 10-year recovery process. The market’s getting a hang of it. The way they’ve managed the news flow seems quite clever. They haven’t let a swathe of bad news at once,” said Keith Temperton, sales trader at Forte Securities.

Concerns over Evergrande’s default have further dented appetite for Chinese stocks, after a series of regulatory moves by Beijing against major technology firms wiped out billions in market value this year.

But U.S. technology stocks have fared better than other sectors this month, with investors preferring relatively safer spaces due to seasonally weak trends in September.

Reporting by Ambar Warrick and Sruthi Shankar in Bengaluru; Editing by Arun Koyyur

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