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MARKET SNAPSHOT: Stock Market Ends Higher As Trump Signs Tariffs, But Spares Canada, Mexico

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03/08/2018 | 10:50pm CET

By Sue Chang, MarketWatch , Ryan Vlastelica

Trump signs proclamation to impose hefty tariffs on imported steel, aluminum

The stock market closed higher and the Nasdaq extended its winning streak for a fifth session Thursday after President Donald Trump signed a proclamation to impose tariffs of 25% on imported steel and 10% on aluminum, but exempted Canada and Mexico while allowing other countries to negotiate exclusions.


How did the main benchmarks fare?

The Dow Jones Industrial Average gained 93.85 points, or 0.4%, to end at 24,895.21. The S&P 500 index rose 12.17 points, or 0.5%, to close at 2,738.97. The Nasdaq Composite Index added 31.30 points, or 0.4%, to finish at 7,427.95.

The three gauges stand below all-time highs set in late January, but they've also rallied from lows reached in early February, when investors were increasingly nervous about an uptick in inflation and rising interest rates.

What drove the markets?

The tariffs will go into effect on March 23 but will exempt certain countries such as Canada and Mexico as U.S. attempts to renegotiate the North American Free Trade Agreement with both countries. Trump also decreed that tariffs can be modified for certain countries such as Australia, which Trump referred to as a "long-term partner."

Issues surrounding trade have driven market action in both directions over the past week. Investors are concerned that an escalation of protectionism, or retaliation by trading partners, could threaten U.S. economic growth. For example, the European Union has lined up retaliatory action if the Trump administration imposes levies on its products.

In an interview on Bloomberg TV, J.P. Morgan(>> company sheet) boss Jamie Dimon said tariffs were "the wrong way" to go about tackling trade problems.

The late Tuesday resignation of pro-trade White House adviser Gary Cohn also added to the uncertainty, but had a short-lived impact on the market. The Dow has fallen 0.5% so far in March, while the Russell 2000 , an index of small-capitalization stocks that is seen as having less exposure to international trade , is up 3.8% over the same period.

Check out:MarketWatch's Economic Calendar

However, there are a number of positive factors that continue to support equities outside of the trade issue, including growing corporate profits and improving economic data. In the latest economic data, jobless claims rose by 21,000 in the latest week , rebounding off their lowest level since 1969.

No Federal Reserve officials were scheduled to speak Thursday. The European Central Bank left interest rates unchanged but removed language from its statement saying it would boost the size of its asset purchases if conditions deteriorated. The move was widely described as a small step toward ending the ECB's quantitative easing program later this year.

What were strategists saying

"The tariffs are driving volatility in the short term, but it seems like it is more about politics than a fundamental policy change, given the reports that Mexico and Canada could be exempt. We think the likelihood of a full trade war is low, and that any market dips are a buying opportunity," said Abe Sheikh, co-chief investment officer of Cougar Global. Cougar is an affiliate of Carillon Tower Advisors, which has $65 billion in assets.

"Valuations are on the high end, though they're somewhat justified by earnings growth. However, we're especially careful about investing in markets that have bigger downside risk."

What did other assets do?

European stocks gained across the board and Asian markets closed higher .

Check out:Here's the case for a hawkish tweak to the ECB's policy guidance

Gold futures settled higher and oil futures lost ground as the ICE U.S. Dollar Index rose 0.6% . The yield on the 10-year U.S. Treasurys fell 3 basis points to 2.86%.

Which stocks were key movers?

Shares across the metals and mining sector fell , with United States Steel Corp. (X) giving up 2.9%, AK Steel Holding Corp. (>> company sheet) dropping 4% and Nucor Co declining 2.7%. Century Aluminum Co. dropped 7.5%.

hares in Express Scripts Holding Co. jumped 8.6% after health insurer Cigna Co said it plans to buy the pharmacy-benefits manager in a $67 billion deal . Cigna's stock fell 12%.

Supermarket operator Kroger Co. sank 13% after it reported its fourth-quarter results .

Rent-A-Center Inc. rose 10% a day after it announced layoffs and said it was reviewing "strategic and financial alternatives " to maximize stockholder value, including evaluating the sale of the company.

American Eagle Outfitters Inc. tumbled 9.4% despite reporting strong-than-expected revenue and raised its dividend .

Shares in Costco Wholesale Corp.(>> company sheet) fell 0.9% a day after it posted better-than-expected revenue along with earnings that were boosted by the U.S. tax overhaul

Newspaper publisher Tronc Inc. reported earnings that missed forecasts , sending shares tumbling 24%.

Shares of Caesars Entertainment Corp. rose 0.8% after the casino operator said it swung to a quarterly profit .

--Victor Reklaitis contributed to this report

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL -0.34% 23868.96 Delayed Quote.-0.15%
NASDAQ 100 -0.94% 6617.9288 Delayed Quote.7.15%
NASDAQ COMP. -0.83% 7105.8612 Delayed Quote.6.68%
S&P 500 -2.52% 2643.69 Real-time Quote.1.43%
US DOLLAR INDEX 0.09% 89.86 End-of-day quote.-2.17%
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