Stocks dive after steel tariff threat
U.S. stocks dived Thursday in another dizzying day of trading after President Trump promised stiff tariffs on imported steel and aluminum. The move raised the threat of escalating retaliation by other countries and higher inflation. The Standard & Poor’s 500 index erased nearly all of its gains for the year.
Indexes bounced between modest gains and losses earlier in the day, until Trump told industry executives that they would “have protection for the first time in a long while” and that he planned to impose tariffs of 25% on steel imports and 10% on aluminum imports next week.
“I don’t know if this will cause a trade war, and obviously that’s the fear,” said Lamar Villere, portfolio manager at investment manager Villere & Co. “But this is exactly what candidate Trump said he would do: He said he would be very protectionist and ‘America first.’ ”
The S&P 500 tumbled 36.16 points, or 1.3%, to 2,677.67 — losing at least 1% for the third straight day. The index had only four such days last year. It is now up just 0.2% for the year.
The Dow Jones industrial average dropped 420.22 points, or 1.7%, to 24,608.98. The Nasdaq composite fell 92.45, or 1.3%, to 7,180.56.
As a candidate, Trump campaigned on an “America first” trade policy, and a big fear for investors has been that increasingly nationalistic governments will impose barriers that hurt the global economy and trade and that harm U.S. exporters’ profits. Apple, the most valuable U.S. firm, got 63% of its sales from outside the United States in its latest fiscal year.
European Commission President Jean-Claude Juncker said the European Union will take retaliatory action if Trump goes ahead with his tariff plan.
Shares of U.S. steelmakers surged on the tariff news. U.S. Steel rose 5.8% to $46.01. But shares of companies that use lots of steel fell, as did exporters.
Industrial companies in the S&P 500 fell 1.9%, the sharpest loss among the 11 sectors that make up the index. Aerospace giant Boeing retreated 3.5% to $349.69.
Stocks of smaller companies, which tend to do more of their business in the U.S. and may not feel as much pain from a global trade war, held up better than the rest of the market.
Bond prices rose as demand jumped for safer investments, which pushed yields down. The yield on the 10-year Treasury note sank to 2.81% from 2.86%.
Stocks were higher earlier in the day after Federal Reserve Chairman Jerome H. Powell testified before Congress and appeared to calm one of the market’s main worries: that the Fed may get more aggressive about raising interest rates to beat down inflation amid the strengthening job market and economy.
Patterson Cos. dived 23.7% to $24.11 — the biggest loss in the S&P 500 — after it reported weaker quarterly earnings than expected and announced its chief financial officer was leaving. The company sells dental and animal health products.
Monster Beverage sank 14.4% to $54.22 after the energy drink company said its gross profit fell and some international customers cut back on purchases.
L Brands slid 13.9% to $42.49 after the Victoria’s Secret owner forecast a smaller 2018 profit than expected.
Box plunged 23.3% after the cloud storage company’s forecast disappointed.
Salesforce.com rose 2.7% to $119.43 after the customermanagement software company had a better-than-expected quarter and gave solid 2018 forecasts.
Best Buy climbed 4% after posting a good holiday season and issuing a rosy forecast.
Benchmark U.S. crude fell 65 cents to $60.99 a barrel. Brent crude fell 90 cents to $63.83 a barrel. Natural gas rose 3 cents to $2.70 per 1,000 cubic feet. Heating oil fell 2 cents to $1.89 a gallon. Wholesale gasoline fell 3 cents to $1.90 a gallon
Gold dropped $12.70 to $1,305.20 an ounce. Silver fell 13 cents to $16.28 an ounce. Copper fell 1 cent to $3.12 a pound.
The dollar fell to 106.24 yen from 106.66 yen. The euro rose to $1.2255 from $1.2203.