The S&P 500 and the Nasdaq erased morning losses, while the Dow closed lower Friday as investors struggled to determine whether President Trump's proposed steel and aluminum tariffs could trigger a trade war.
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The Dow Jones Industrial Average fell 70.92 points, or 0.29%, to 24,538.06. The S&P 500 broke into positive territory in afternoon trading, rising 13.58 points, or 0.51%, to 2,691.25. The Nasdaq Composite jumped 77.31 points, or 1.08%, to 7,257.87.
Trump's tweet stating that "trade wars are good" rocked U.S. stocks, with the Dow at one point falling more than 300 points. Steel stocks were mixed as investors gauged the long-term impact of the move and weighed concerns that the tariffs will effectively tax corporations that use steel to manufacture products.
The president's plan includes a 10% tariff on imported aluminum and a 25% tariff on imported steel. Prospects of retaliation by trading partners – including China, the world’s second-largest economy – sent investors fleeing to financial havens.
Gold was trading $18 higher, or 1.38%, at $1,323.20 an ounce.
“The ultimate economic impact of potential new U.S. tariffs on steel and aluminum imports will be determined by a range of factors, including their severity and duration, as well as any retaliatory measures that may be taken by other countries,” Atsi Sheth, managing director of Moody’s Investors Service. “Tariffs would likely have a direct impact on steel and aluminum prices, and these could flow into overall price levels.”
Tariffs have become the latest theme to cause volatility in global financial markets. The news helped fuel a 3.1% loss in the Dow this week, as the blue-chip index posted red ink in four consecutive sessions. The S&P lost 2% on the week, and the Nasdaq retreated about 1.1%.
Tom Essaye, founder of The Sevens Report, said industrials are potentially a big loser if steel and aluminum tariffs take effect, though it remains to be seen if Trump’s trade threat would change the outlook for stocks.
“Bottom line, these tariffs aren’t a bearish gamechanger (we’ll need to see trade retaliation on a major scale for that to happen), but this decision injects unneeded uncertainty into the economic outlook,” he wrote in a note to clients.
|X||UNITED STATES STEEL CORPORATION||15.57||+0.51||+3.39%|
|STLD||STEEL DYNAMICS INC.||37.16||-0.18||-0.48%|
Bankrate.com Chief Financial Analyst Greg McBride urged retail investors to “hang in there” and focus on the long term.
“A month ago, we saw a stock market correction because of concerns of inflation and higher interest rates,” McBride told Fox Business. “That may be a theme throughout the year. The central bank here in the U.S. is raising interest rates and shrinking their balance sheets. Other banks around the globe are likely to do so as well over the course of the next year. Markets are forward looking. It’s a recipe for higher levels of volatility.”