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Stock Market News for March 15, 2018

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Benchmarks closed in the red for the third consecutive trading day on Wednesday following concerns over a possible trade war between the U.S. and China. President Trump is expected to levy fresh tariffs on Chinese imports and announced that U.S.’s trade deficits with China will be reduced significantly. Shares of Dow component Boeing declined after investors fretted that a possible trade war between the two biggest economies may push China to retaliate, which may adversely affect the company. Boeing’s performance weighed on broader markets, with the Dow registering a one-day decline of around 250 points.

How the Benchmarks Fared?

The Dow Jones Industrial Average (DJI) decreased 1%, or 246.74 points, to close at 24,758.12. The S&P 500 fell 0.6% to close at 2,749.48. The tech-laden Nasdaq Composite Index closed at 7,496.81, losing 0.2%. The fear-gauge CBOE Volatility Index (VIX) increased 3.9% to close at 16.99. A total of 6.53 billion shares were traded on Wednesday, lower than the last 20-session average of 7.14 billion shares. Decliners outnumbered advancers on the NYSE by a 1.35-to-1 ratio. On Nasdaq, a 1.53-to-1 ratio favored declining issues.

Trump To Initiate Trade War With China?

Per U.S. Census Bureau data, the United States posted a trade deficit of $375 billion with China last year, which was two-thirds of the economy’s trade gap of $566 billion. In contrast, China registered trade surplus of $276 billion during the same period, which was also two-thirds of the second biggest economy’s trade surplus of $422.5 billion.

Last Wednesday, President Trump tweeted that the U.S. is looking to reduce its trade deficit by $1 billion.  A White House spokesperson later clarified that the exact amount was around $100 billion. Additionally, Trump reportedly said that the U.S. is looking to impose “tariffs on up to $60 billion of Chinese imports,” with Chinese telecommunications, apparel and technology sectors likely bearing most of the brunt.

Following this development, a trade war is likely to break out between the United States and China. Investors fear that The Boeing Company (BA - Free Report) might be the primary target of Chinese retaliation. The aircraft manufacturer projected last September that China may invest about $1 trillion over the next 20 years to acquire aircraft from the company.

Any hostile move from China will jeopardize Boeing’s performance, which is why its shares fell 2.5% on Wednesday, weighing on the Dow and the industrials sector of the S&P 500. The Industrial Select Sector SPDR (XLI) declined 1.1%, becoming the second biggest loser among the S&P 500 sectors. Some of its key holdings, including 3M Company (MMM - Free Report) and Union Pacific Corporation (UNP - Free Report) fell 1.4% and 1.5%, respectively.

Additionally, the Materials Select Sector SPDR (XLB) decreased 1.3% and was the worst performing sector in the S&P 500. Two of its main components, DowDuPont Inc. (DWDP - Free Report) and Praxair, Inc. (PX - Free Report) declined 2.2% and 1.8%, respectively. Praxair has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PPI Increase Less Than January’s, Retail Sales Fall

In economic news, the U.S. Bureau of Labor Statistics reported that the U.S. Producer Price Index (PPI) for finished goods increased 0.2% in February. This increase was slightly higher than the consensus estimate of 0.1%, but fell short of January’s rise of 0.4%. Core PPI rose 0.2% in February, in line with January’s movement. Subdued PPI number along with in line consumer price inflation data reduced concerns over the pace of Fed rate hikes this year.

Additionally, the Commerce Department reported on Tuesday that retail sales fell 0.1% last month, in contrast to the consensus estimate of 0.4% increase. Retail sales fell for third straight month, indicating that consumer spending will fall in the first quarter of this year. However, core retail sales increased 0.1%, which are closely correlated with the consumer spending component of the GDP.

Stocks That Made Headlines

V.F. Corp Poised to Grow on Altra Brand Acquisition

V.F. Corporation (VFC - Free Report) has agreed to buy the Altra footwear brand from ICON Health & Fitness, Inc., a leading Utah-based health & fitness company. (Read More)

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