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Stock Market News For Jun 18, 2018

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Markets closed lower on Friday, but well off the lows of the day, as investors somewhat shed worries of a United States-China trade war. These fears were triggered by President Trump’s announcement that tariffs would be imposed on Chinese goods worth $50 billion. The volatility in the market saw all three major indexes ending the day in red.

The Dow Jones Industrial Average (DJI) declined 0.3%, to close at 25,090.48. The S&P 500 fell 0.1% to close at 2,779.42. The Nasdaq Composite Index closed at 7,746.38, declining 0.2%. A total of 9.9 billion shares were traded on Friday, higher than the last 20-session average of 6.9 billion shares. Decliners outnumbered advancers on the NYSE by a 1.21-to-1 ratio. On Nasdaq, a 1.02-to-1 ratio favored advancing issues.

How did the Benchmark Perform?

The Dow lost 84.83 points, after having shed as much as 280 points at one time, on after President Donald Trump announced fresh tariffs on Chinese goods. Shares of Boeing (BA - Free Report) and Caterpillar (CAT - Free Report) declined 1.3% and 2%, respectively. Caterpillar has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The S&P 500 shed 3.07, after trading in the green for a short span. The Energy Select Sector SPDR (XLE) lost 2.2%, on concerns of oversupply, while the Materials Select Sector SPDR (XLB) declined 0.7%. The tech heavy Nasdaq lost 14.66 points.

U.S. Announces Fresh Tariffs on China

Fears of trade war between the United States and China have gripped markets on a while now. On Friday, the United States announced fresh tariffs of 25% on Chinese goods worth $50 billion. The new tariffs come into effect from Jul 6. Moreover, Trump said that the United States would impose more import duties if China decides to retaliate by imposing tariffs on U.S. products.

The two countries have been holding numerous meetings since May and creating pressure on China to reduce a trade deficit of $375 billion in order to avoid a trade war. As a retaliatory measure, China too announced its list of U.S. goods subject to tariffs.

Friday’s announcement saw investors panicking once again on fears of a trade war, leading to huge selloffs. However, the losses were pared to some extent in the latter half of the trading session, as fears somewhat subsided.

Impressive Economic Data

The University of Michigan’s consumer sentiment index jumped to 99.3 in June. Also, the Empire State Manufacturing Survey rose 4.9% in June to a reading of 25. This is also the highest reading since Oct 2017. However, manufacturing production fell 0.7% in May, while capacity utilization declined to 78.1% during the same time period.

Weekly Roundup

It was an eventful week that saw a historic meeting between Trump and North Korea’s premier Kim Jong-Un. This saw markets rallying on Monday. However, markets ended mixed on Tuesday as the meeting failed the generate much of investor’s enthusiasm. Midweek, the Fed hiked the benchmark fund rate by 25 basis points from 1.75% to 2%. This was the second rate hike in 2018 and was in line with market expectations. This saw markets ending in the negative territory.

However, markets bounced on Thursday, led by a rally in media and telecom stocks, after a judge approved the AT&T (T - Free Report) and Time Warner deal. Also on the same day, the ECB, announced after its governing council meeting that the central bank will continue its low interest rate policy and benchmark rates will remain unchanged until mid-2019.

The Nasdaq gained 1.3%, while the Dow lost 0.9% for the week. The S&P 500 narrowly managed to end the week in green, rising 0.01%. Both the Nasdaq and S&P 500 registered its fourth straight weekly advance.

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