Published: Mon, March 05, 2018
Money | By Hannah Jacobs

Markets Right Now: Stocks waver as Fed chief testifies

Markets Right Now: Stocks waver as Fed chief testifies

It's the latest dizzying swing in a whirlwind week as investors recalibrate - again and again - how anxious to be about a possible trade war and a more aggressive Federal Reserve.

Wall Street stocks fell sharply at midday Thursday, with the Dow down more than two percent on worries of a trade war after President Donald Trump said he will slap tariffs on steel and aluminum imports.

Investors have a different impression. Markets tumbled from Asia to Europe, where the president of the European Union's governing body promised retaliation if Trump follows through.

Netflix has now added more than $47 billion in market value this year on the way to an S&P 500-leading gain of 57 percent. Eastern time. It was up as much as 0.6 percent and down as much as 1.2 percent in choppy trading earlier.

The S&P 500 is on pace for a loss of 3.5 percent this week, which would be its third decline that severe in the last five weeks.

"I view almost every one of Trump's actions through a negotiation lens", he said.

Phil Orlando, chief equity strategist at Federated Investors in NY, said Trump's announcement was made to call everyone's attention to the US trade deficit but investors decided that a full-blown global trade was not going to happen. That boosted steel and aluminum stocks, but the move will mean higher costs for GM and other automakers, Boeing, Caterpillar and many others.

A "trade war is in no one's interests", said Roberto Azevedo, head of the World Trade Organization. GM reported weak US auto sales Thursday, but much of the stock loss followed Trump's tariff move.

Not only was the month's loss sharp, at 3.9 percent for the Standard & Poor's 500 index, it was also the first in a long time.

"Investors are grappling with the prospects of higher than expected interest rates and inflation, and a potentially more hawkish Fed", said Chris Zaccarelli, chief investment officer at Charlotte, North Carolina-based Independent Advisor Alliance. That could easily upset markets, which had been enjoying a remarkably smooth ride past year. Some investors took that as a signal that the Fed may get more aggressive about raising rates, which sent stocks down and Treasury yields higher.

Powell told the Senate Finance Committee that he does not see inflation in workers' wages "at a point of acceleration". The two-year yield, which moves more on expectations of Fed movements, held steady at 2.22 percent. The two-year yield slipped to 2.23 percent from 2.26 percent, and the 30-year yield dropped to 3.11 percent from 3.13 percent. The home-improvement retailer's stock dropped $6.20, or 6.5 percent, to $89.59. Shares of the company, which sells dental and animal health products, dropped $7.57, or 24 percent, to $24.01.

MARKETS ABROAD: In Asia, Japan's Nikkei 225 plunged 2.5 percent, the Hang Seng in Hong Kong fell 1.5 percent and South Korea's Kospi dropped 1 percent.

Heavy equipment maker Caterpillar fell 2 percent and aerospace giant Boeing gave back 4 percent. It is down 3.9 percent for February but still up 1.5 percent in 2018.

The April crude contract was up 26 cents to US$61.25 per barrel and the April natural gas contract was unchanged at US$2.70 per mmBTU. The euro rose to $1.2255 from $1.2203, and the British pound slipped to $1.3768 from $1.3771.

Bond prices rose. The yield on the 10-year Treasury fell to 2.80 percent.

Gold rose $18.80, or 1.4 percent, to $1,324.00 per ounce. The index had five losses of 1 percent or more in February, more than it did in all of a year ago.

CURRENCIES: The dollar weakened to a fresh 15-month low, slipping to 106.01 from 106.24 yen late Thursday.

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