U.S. stock indexes opened ugly and clung to losses in afternoon action Wednesday as tariff-related news continued to haunt the stock market.
The Dow Jones industrial average dropped 1.3%, while the S&P 500 and the Nasdaq fell 0.85% and 0.55%, respectively. The small cap Russell 2000 was flat.
Volume in the stock market today was running behind the previous session’s pace.
President Trump’s chief economic advisor Gary Cohn, an opponent of tariffs, announced late Tuesday that he would depart in the coming weeks. Cohn’s exit could give more influence to Peter Navarro, an economist in the Trump administration who is outside the professional consensus in economics. Navarro says trade deficits are bad, and he favors tariffs.
Meanwhile, the New York Times reported that European Union officials said they had a list of American-made goods that would face tariffs if Trump follows through on his plan to slap tariffs on steel and aluminum.
The U.S. could soon launch sweeping tariffs and other curbs vs. China for alleged intellectual property theft, Bloomberg reported. President Trump hinted at such a move on Twitter on Wednesday.
After tweeting earlier that the U.S. has asked China to rein its its huge trade surplus with America, Trump said the U.S. is “acting swiftly on Intellectual Property theft.”
The U.S. is acting swiftly on Intellectual Property theft. We cannot allow this to happen as it has for many years!
— Donald J. Trump (@realDonaldTrump) March 7, 2018
That 11:38 a.m. ET tweet coincided with the end of a second rebound attempt by the major averages.
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The stock market has reacted to each turn in the tariff story, falling whenever the likelihood of a trade war increases.
Dow Jones industrial average components Boeing (BA) and Caterpillar (CAT) fell nearly 2% and almost 3%, respectively. The two companies could be hurt by steel-price hikes. Both companies also have heavy international exposure and could be hurt if other countries respond to Trump’s tariffs with anti-U.S. measures of their own.
Part of the reason for the market’s reaction is uncertainty. Identifying which stocks will be either helped or hurt in a trade war isn’t easy.
For example, United States Steel (X) and Steel Dynamics (STLD) advanced 3.3% and 0.9%, respectively, in heavy volume Wednesday. But analysts disagree on whether tariffs will help U.S. steel companies or create a backlash from other countries, thereby ultimately hurting companies such as United States Steel. More than 20% of U.S. Steel’s revenue is from Europe.
Among IBD’s 197 industry groups, construction equipment stocks and retail took the day’s hardest hits. On the upside, steel producers and personal care companies rose.
In the Cosmetics/Personal Care space, seven stocks rose 2% or more. Medifast (MED) rocketed 33% as it broke out of a consolidation on earnings that topped the consensus view by 25%.
Other breakouts in afternoon action included: Georgia-based bank Synovus Financial (SNV), up 0.8% in strong volume; executive recruiter Korn Ferry International (KFY), up 11% in huge volume; Hilton Grand Vacations (HGV), up 0.6% in brisk volume; and data-storage provider Western Digital (WDC), up nearly 2% in fast turnover.
The Mortgage Bankers Association reported mortgage applications inched up 0.3% vs. the prior week’s 2.7% gain.
ADP’s employment report for February advanced to 235,000, stomping the consensus view by about 15%. The January reading was revised about 4% higher than initially reported. On Friday, the Bureau of Labor Statistics will release its report on payrolls and unemployment.