U.S. Stocks End Volatile Month on a Whimper Ahead of New Tariffs

The Dow and broader U.S. stock market traded mixed-to-higher on Friday, as a planned tariff escalation by the United States and China began to weigh on investors’ sentiment.

Dow, S&P 500 Eke Out Gains; Nasdaq Lags

Wall Street’s major indexes traded choppy to end the week, with the Dow Jones Industrial Average paring most of its gains. The blue-chip index settled up 41.03 points, or 0.2%, at 26,403.28.

The Dow Jones Industrial Average pares most of its gains Friday. | Source: The Wall Street Journal.

The broad S&P 500 Index of large-cap stocks finished up 0.1% at 2,926.46. Gains were primarily concentrated in materials, industrials and financials stocks.

Meanwhile, technology-focused Nasdaq Composite Index settled down 0.1% at 7,962.88.

The major indexes rounded out their best weekly gains since June, with the Dow rallying 3%, the S&P 500 adding 2.8% and the Nasdaq finishing 2.7% higher.

U.S., China to Implement New Tariffs

In less than 48 hours, the United States and China will implement new tariffs on each other’s goods, prolonging a trade war that has derailed both economies. Tariffs not only impact the consumer, who pays for the duties indirectly through higher prices, but corporate profits as well.

Earlier this week, both countries offered the possibility of trade negotiations resuming next month. Even if the face-to-face discussions do happen, a comprehensive trade agreement is highly unlikely because negotiators are too far apart on key issues like intellectual property and Chinese industrial policy.

Although the trade war has not resulted in a global recession just yet, it has forced central banks to lower interest rates. The Federal Reserve slashed interest rates last month for the first time in over a decade and is expected to do so again in September.

Trump: Fed Is the Problem

Stocks came under pressure on Friday after President Trump said the U.S. “doesn’t have a tariff problem … we have a Fed problem.”

Trump has lashed out against the Fed several times throughout his tenure because he believes monetary policy is harming the economy. Earlier this month, the president said central bankers should lower rates by “at least 100 basis points” and throw in some quantitative easing as well.

“If the Fed would cut, we would have one of the biggest Stock Market increases in a long time. Badly run and weak companies are smartly blaming these small Tariffs instead of themselves for bad management…and who can really blame them for doing that? Excuses!” – Donald Trump 

Trump wants easy monetary policy despite claiming that the economy is the strongest it has ever been. This goes against economic orthodoxy, which states that interest rates should rise if the economy is doing well.

Featured image courtesy of Shutterstock. Chart via The Wall Street Journal. 

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