Daily Update: U.S. Stocks Dragged Lower by Trade War Risks, Signs of Sluggish Economy

U.S. stocks headed for losses Wednesday, with the Dow and S&P 500 recording their third consecutive down session as fears of a potential trade war continued to weigh on investor sentiment.

Stocks Extend Losses

All of Wall Street’s major indexes reversed early gains to finish in negative territory.  The S&P 500 Index declined 0.6% to close at 2,749.48, with nine of 11 sectors registering losses. Consumer staples and materials were the biggest laggards, followed by financials. Telecommunication services was the only major sector to make notable gains on Wednesday.

The Dow Jones Industrial Average fell 248.91 points, or 1%, to 24,758.12. The technology-heavy Nasdaq Composite Index declined 0.2% to settle at 7,496.81.

The CBOE Volatility Index, also known as the VIX, rose more than 5% on Wednesday to settle at 17.21. The so-called “fear index” has traded between 15-20 in recent weeks, a range that is much higher than levels seen over the last two years.

Stocks were pressured by the lingering threat of a global trade war as well as signs of growing instability within the Trump administration. On Tuesday, President Trump ousted Secretary of State Rex Tillerson and hired Mike Pompeo as his replacement. Prior to joining the Trump administration, Pompeo served as Director of the Central Intelligence Agency (CIA).

Retail Sales Decline for Third Straight Month

Receipts at retail stores declined in February for a third straight month, prolonging the worst slump since 2013.

The Commerce Department reported a 0.1% decline in the retail sales category last month, following a similar drop the previous month. Analysts in a median estimate called for retail sales to climb 0.3% from January.

Retail sales are seen as an important proxy for consumer spending, which accounts for more than two-thirds of U.S. economic activity.

The Federal Reserve Bank of Atlanta has slashed its outlook on first-quarter growth to a paltry 1.9%. The regional Fed Bank had previously forecast annual growth of as much as 4.2% for the first quarter.

A report from the Department of Labor Wednesday showed producer inflation strengthening to a 2.8% annualized rate in February, compared with 2.7% in January. On Tuesday, Labor reported 2.2% annualized growth in consumer prices for February.

Rising inflation likely extinguishes any doubts investors have about the Federal Reserve’s intent to raise interest rates later this month. At last check, Fed Fund futures prices implied a nearly 89% chance of liftoff following the central bank’s upcoming meeting Mar. 20-21.

Featured image courtesy of Shutterstock.

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi