Markets ended higher on Thursday even as President Trump signed the tariff plan into law. As of now, the plan excludes countries like Canada and Mexico. In retaliation, the European Union officially announced a three-way approach to hit back against such tariffs. The three major benchmarks ended in the green. Finally, initial jobless claims surged to their highest levels in the last six weeks.
The Dow Jones Industrial Average (DJI) increased 0.4% to close at 24,895.21. The S&P 500 gained 0.5% to close at 2,738.97. The tech-laden Nasdaq Composite Index closed at 7,427.95, increasing 0.4%. The fear-gauge CBOE Volatility Index (VIX) decreased 6.9% to close at 16.54. A total of 6.38 billion shares were traded on Thursday, considerably lower than the last 20-session average of 7.65 billion shares. Advancers outnumbered decliners on the NYSE by a 1.38-to-1 ratio. On Nasdaq, a 1.15-to-1 ratio favored advancing issues.
What are the Benchmarks Doing?
The Dow amassed 93.9 points to finish the session in positive territory. Meanwhile, the Nasdaq gained 31.30 points to also finish in the green. Gains for both the indexes were rather broad based.
The S&P 500 added 12.2 points to close higher on Thursday, with gains for the broader index supported by a surge in consumer staples and real estate shares. Of the 11 major segments of the S&P 500, 10 ended in the positive territory, with only energy ending in the red.
The Consumer Staples Select Sector SPDR ETF (XLP) and the Real Estate Select Sector SPDR (XLRE) surged 0.9% and 0.8%, respectively. Meanwhile, the Energy Select Sector SPDR ETF (XLE) dipped a paltry 0.03% on Thursday. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Trump Signs the Tariff Plan
President Trump signed the tariff plan into law on Thursday, which will come into effect from Mar 23, 2018. Per this law, fresh levies have been imposed on steel and aluminum. However, the plan excludes countries like Canada and Mexico, offering Trump a chance to renegotiate terms of the North American Free Trade Agreement (NAFTA) with the two countries. Also, the United States wants to discuss national security issues with both these countries.
Further, referring to Australia as United States’ “long-term trading partner”, Trump stated that tariffs might be modified for the country along with a few others. Moreover, such tariffs have been imposed under a law which clearly allows any “action” in favor of U.S. national security. Officials from the Trump administration have stated that both steel and aluminum are important for the defense industry of the United States.
European Union’s Retaliation to Trump’s Tariffs
In a not so surprising move on Wednesday, EU Commissioner Cecilia Malmström announced at a press conference that EU was ‘discussing’ about which U.S. products it would impose tariffs on if Trump levies hefty tariffs on steel and aluminum imports.
Ultimately, the EU officially announced a three-way plan of action to hit back against the latest tariff plan. First, the EU plans to move a case against the United States to the WTO, in cooperation with other trading members of the bloc. This would be done in order to protect industries within the EU from Trump’s tariffs. Further, Malmström stated that EU being an ally of the US in NATO forces cannot pose a national threat to America — which is principles on which the new tariff plan is based on.
Secondly, the bloc would use WTO-allowed measures to fight tariffs it believes are unjust. Malmström made it very clear that any action would be taken in compliance with the rules and regulations established by the WTO and also stated that a trade war would not benefit any country.
Finally, the EU also plans to impose duties and tariffs on goods imported from the United States. The body has come up with a provisional list of products that would be met with hefty tariffs once imported into the EU. If imposed, such tariffs would amount to an additional $3.5 billion for producers in the US.
On the economic data front, initial jobless claims surged by 21,000 to 231,000 claims in the last week. The consensus estimate for the period was 221,000. This marks its highest level in six weeks.
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