Stock futures fall after Trump proposes more tariffs on China

Javier Stokes
April 10, 2018

The Dow Jones Industrial Average was down 340 points at its lows, or 1.3%, but was most recently off 240 points, or 1%, at 24,434, while the S&P 500 index was off 0.9% at 2,686, with the health-care sector off 1.3% and the energy sector down 1.2% in early trade. In the absence of new all-time highs, stock fans on bear watch should be waiting for the 21,293.37 level in the Dow and 2,298.30 in the S&P. Beijing responded within hours by announcing $50 billion worth of tariffs on USA goods.

Wary investors had been holding out hope that the two sides will reach a deal before the proposed trade barriers go into effect.

"We've gone from Larry Kudlow trying to calm the markets down to the administration saying, 'Hey, ignore the markets, '" Hogan said. He said in a Friday morning interview that tariffs targeting China could cause some "pain" in the US economy, but promised that America would emerge stronger as a result.

"These potential trade wars are not good for the market", said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.

China announced fresh tariffs on 106 United States products on Wednesday.

"I feel like this is a typical reaction, but I think that it will come back around", said Zach Holt.

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Analysts said the market also responded to Federal Reserve Chair Jerome Powell, who said that the US economy was growing and a turbulent stock market would not change the Fed's course to gradually raise interest rates. Oil prices fell nearly 5 per cent this week as investors wondered if an increase in trade tensions will reduce demand for oil by slowing down the global economy.

Bob Smith, president and chief investment officer at Sage Advisory Services Ltd Co in Austin, Texas, said the markets were going to react adversely to Trump's latest statement.

To make things worse, the USA economy added fewer jobs than expected in March, according to a government report released Friday morning.

With the Dow and 10-year yields testing support near the tops of 70-year and 25-year channels in the first chart and the Dow and S&P testing support at each (2) in the second chart, if these support lines would break to the downside, don't be surprised if selling pressure picks up. Investors were watching that number because it's a barometer of inflation.

The combination of the hiring slowdown and modest wage growth temporarily eased Wall Street's concerns that the economy was overheating.

The Chinese government responded by reiterating that it doesn't want "to fight a trade war, but we are not afraid of fighting it".

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