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Stock Market News for March 5, 2018

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Healthy rise in healthcare shares helped the S&P 500 and the Nasdaq finish in the positive territory on Friday. Such shares rose as they aren’t affected by Trump tariffs on imported steel and aluminum. However, such tariffs did have a negative impact on the overall investor sentiment that led all the three major indexes post a weekly loss for the first time in three weeks. Tariffs on steel and aluminum imports could hurt corporations as well as consumers, while it also stirred fears of a trade dispute between the United States and China.

How the Benchmarks Fared?

The Dow Jones Industrial Average (DJI) decreased 0.3%, or 71.68 points, to close at 24,538.06. The S&P 500 gained 0.5% to close at 2,691.25. The tech-laden Nasdaq Composite Index closed at 7,257.87, increasing 1.1%. The Cboe Volatility Index (VIX), Wall Street’s so-called fear gauge came in at 19.59, way higher than a reading near 11 for most of 2017. Decliners outnumbered advancers on the NYSE by 1,416 to 1,390. On the Nasdaq, 1,865 issues rose and 993 fell.

Healthcare Shares Rise

Sharp rise in healthcare shares, somewhat, helped the S&P 500 and the Nasdaq finish in the green. After all, they are least affected from Trump’s tariffs on foreign steel and aluminum.

The Health Care Select Sector SPDR ETF (XLV) was the best performing sector among the S&P 500 sectors, gaining 1%. Individually, Perrigo Company plc (PRGO - Free Report) was among the best performers in the index, increasing 4.3%. The iShares Nasdaq Biotechnology ETF (IBB - Free Report) also advanced 2.4%.

Trump Tariffs Drag Markets Down for the Week

The major bourses, however, ended in the red for the week. The Dow, the S&P 500 and the Nasdaq declined 3.1%, 2% and 1.1%, respectively. Trump’s tariffs declaration on steel and aluminum imports prompted a steep stock market sell-off.

Trump said that the U.S. will impose a 25% tariff on steel imports and a 10% tariff on aluminum. Such a protectionist trade policy triggered a lot of concern among corporations and consumers. Tariffs will increase the cost of companies that rely heavily on aluminum and steel, like auto and plane makers. In fact, Corporate America has cautioned Trump that tariffs could backfire. After all, imports make up for about a third of the steel American business houses use every year.

Higher prices on steel and aluminum, furthermore, will compel companies that rely on such products to pass on some of the costs to consumers. Increased consumer prices may in the long run hamper sales growth and affect the company, leading to job losses.

Trump’s contentious tariff announcement has raised apprehensions about retaliation from China and other major U.S. trading partners. China has cautioned America to abide by multilateral trade rules and not to harm the delicate global economy. We shouldn’t forget that China is the world’s dominant steel producer and Trump’s tariff moves could easily start a trade war between them.

Trump’s tariff announcements has already received angry responses from global leaders, with the European Union saying that they will impose tariffs on $3.5 billion worth of U.S. imports, as per Reuters.

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