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MARKET SNAPSHOT: Stock Market Slumps As Cohn Resignation Adds To Trade-war Jitters

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03/07/2018 | 07:40pm CEST

By MarketWatch, MarketWatch

Energy names top sector losers

U.S. stocks traded lower Wednesday, with the Dow down triple digits as the resignation of Gary Cohn, the head of President Donald Trump's National Economic Council, sparked a selloff in risky assets such as equities.

Concerns about the prospect of a global trade war, prompted by Trump's plan to introduce tariffs on steel and aluminum imports, intensified as Cohn had opposed the tariff proposal and was widely viewed as having a moderating influence within the White House.

Read more:How a tariff-rattled stock market is reacting to Cohn's resignation

And

What are the main benchmarks doing?

The Dow Jones Industrial Average sank 245 points, or 1%, to 24,639, with 29 of the 30 blue-chip companies trading lower. Earlier, the blue-chip gauge was off more than 300 points. The lone gainer was International Business Machines Corp. (>> company sheet), which was up 0.5%.

The S&P 500 declined 17 points, or 0.6%, to 2,710, with 10 of its 11 main sectors in the red. The real-estate sector managed to rise 0.3% while energy stocks were big losers as crude oil futures sank nearly 3% on worries about mounting trade friction.

The Nasdaq Composite Index shed 13 points, or 0.2%, to 7,359.

Small-capitalization stocks defied the trend with the Russell 2000 up 4 points, or 0.3%, to 1,566. Small-caps have relatively less exposure to international trade than their large cap peers.

What is driving markets?

Investors were nervous, fleeing assets perceived as more risky after the news of Cohn's resignation. He is regarded as the chief architect of Wall Street-friendly corporate tax cuts signed into law last year, and he was seen as a level head in an administration that has seen tumult.

His decision to leave the role as the president's top economic adviser adds to fears that Trump is adopting an increasingly protectionist stance and could spark a global trade war. That type of conflict could threaten the U.S. economic growth.

Check out:Meet Peter Navarro, the man who pushed Gary Cohn out of the White House

And

The European Union said Wednesday it is discussing which American products it would hit with tariffs if Trump moves ahead with his plan. In addition, the Trump administration is reportedly considering a broad range of import tariffs on Chinese goods .

Don't miss:EU leader responds to Trump's tariff plan: 'We can also do stupid'

What are strategists saying?

"It is not so much the resignation, but the role that Cohn has played in the administration. He was seen as the voice of economic stability and a spokesperson for financial markets," said Brad McMillan, chief investment officer for Commonwealth Financial Network, in a note to investors. "His resignation leaves the president with a set of economic advisers largely seen as outside of the mainstream, or at least perceived as less aligned with Wall Street interests. At a minimum, this introduces more uncertainty into economic policy and raises the chance of policy actions such as tariffs."

"The market is waiting for more details about the tariffs, but the more specifics we get the more chances that trading partners will come with retaliatory response," said Quincy Krosby, chief market strategist, at Prudential Financial.

"In the absence corporate earnings news, and with weeks before the next Fed meeting, markets have more time to react to headline news from Washington. We expect market reaction to news who will replace Cohn, Krosby said.

Much will depend on who Trump chooses to replace Cohn and if his successor is deemed to be in favor of free trade like Cohn, then that can be viewed as a market-friendly outcome, said Fawad Razaqzada, a Forex.com analyst. However, if the new person is a trade hawk, then it could fuel further uncertainties in the market.

Read more:Slumping stocks may 'test the February lows'--analysts react to Cohn's exit

What is on the economic docket?

A hefty lineup of releases kicked off with the ADP employment report for February.

Private-sector employers added 235,000 jobs in February, while the initial January gain of 234,000 was raised by 10,000 in the latest data. February is the fourth month in a row where job gains were 200,000 or higher.

The U.S. trade deficit climbed 5% in January and hit a nearly 10-year high, continuing a steady rise since President Trump took over that could exacerbate already tense disputes between the administration and key trading partners.

Updated numbers show that the fourth-quarter productivity was flat and unit labor costs were raised to 2.5% from 2%.

The Beige Book release is expected at 2 p.m. Eastern, and then a reading on consumer credit in January due at 3 p.m.

Check out:MarketWatch's Economic Calendar

Which stocks are in focus?

Shares in H&R Block Inc.(>> company sheet) rose 9.3% after the tax preparer reported late Tuesday a wider-than-expected fiscal-third-quarter 2018 loss but quarterly revenue that came in above expectations.

Urban Outfitters Inc. late Tuesday reported fourth-quarter earnings that took a hit from the new U.S. tax law . The retailer's stock reversed earlier losses to rise 0.8%.

Autodesk Inc. shares rallied 13% after the company posted fourth-quarter net losses and revenue late Tuesday that beat expectations.

Ross Stores Inc. beat fourth-quarter sales and earnings expectations in its results, but predicted a slower-than-expected pace of same-store sales growth for the year. The retailer's stock was down 5.9%.

Retailer Dollar Tree Inc. shares slumped 16% after earnings report.

How are other markets performing?

European stocks mostly gained and Asian markets closed lower across the board .

The ICE U.S. Dollar Index and gold futures were flat.

--Sue Chang, Mark DeCambre, William Watts, Anora Gaudiano Victor Reklaitis, Karen Friar and Barbara Kollmeyer contributed to this article.

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL -1.15% 24700.21 Delayed Quote.-0.08%
NASDAQ 100 -0.32% 7228.0434 Delayed Quote.13.43%
NASDAQ COMP. -0.28% 7725.5851 Delayed Quote.12.21%
S&P 500 -0.41% 2762.57 Real-time Quote.3.96%
US DOLLAR INDEX 0.31% 95.09 End-of-day quote.3.52%
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