Daily Update: U.S. Stocks Waver on Trump’s Tariff Threat
U.S. stocks ended Tuesday trading on a slightly higher note, although underlying demand was subdued by the threat of an escalating trade war.
Stocks Pull Ahead
Wall Street’s major indexes traded higher by the end of trading Tuesday, with the S&P 500 Index adding 0.3% to 2,728.12. Eight of 11 sectors contributed to the gains, with materials adding more than 1%. Industrials and consumer discretionary stocks also outperformed the market, rising at least 0.5%.
The Dow Jones Industrial Average pared gains to finish virtually flat at 24,884.12. The blue-chip index was down by as much as 166 points by midday. Only 14 of the Dow’s 30 index members finished higher, with gains concentrated in technology and industrials.
The Nasdaq Composite Index was the biggest gainer in percentage terms, rising 0.6% to 7,371.01.
A measure of implied volatility known as the CBOE VIX fell on Tuesday for a third straight session, closing down 2% to 18.36. Volatility has been simmering down over the past week following a dramatic surge in February.
The VIX trades on a scale of 1-100 and moves inversely with the S&P 500 Index roughly 75% of the time.
EU Responds to Trade Tariffs
The European Union (EU) has issued a response to President Donald Trump’s planned tariffs on steel and aluminum by signaling its preparedness to levy duties on American products. EU Commissioner Cecilia Malmstrom told reporters everything from Levi jeans to whiskey could be charged a 25% import tax in retaliation to the president’s new measures.
President Trump on Friday announced tariffs of 25% and 10% on steel and aluminum imports, respectively, but did not go into details about the countries or products affected.
Several of Trump’s allies have come out against the tariffs, including Senator David Perdue, House Speaker Paul Ryan and White House economic adviser Gary Cohn. Cohn would later resign from his post over Trump’s new policy.
On Tuesday, the president turned his tariffs into a bargaining chip offered to Canada and Mexico in pursuit of a comprehensive NAFTA deal. Washington has formally offered Canada and Mexico exclusion from the planned tariffs in exchange for a successful trade agreement. Realistically, the Trump administration has about a month to seal a NAFTA deal that would allow for ratification before July, when Mexico heads for election.
Market participants are also hoping for a resolution to NAFTA before the U.S. midterm congressional elections in November.
In economic news, U.S. factory orders declined more than expected at the beginning of 2018, raising some concern over a slowdown in industrial production. The Commerce Department said bookings for factory goods dropped 1.4% in January following an upwardly revised gain of 1.8% the previous month.
Later this week, the Department of Labor will issue its highly anticipated nonfarm payrolls report, which provides the latest on employment, workforce participation and hourly wage inflation. The February jobs report will be released Friday at 8:30 a.m. ET.
Featured image courtesy of Shutterstock.