Stocks Turn Mixed Despite Trade War Fear, But Will History Repeat? | Stock News & Stock Market Analysis

U.S. stock indexes opened on a negative note and then trimmed some of their losses midday Friday. The stock market is struggling in the aftermath of President Trump’s decision to slap tariffs on aluminum and steel imports.


The blue chip Dow Jones industrial average was 0.7% lower midday Friday. The Nasdaq edged 0.2% higher and the S&P 500 was flat, while the small cap Russell 2000 put up the best defense. The Russell rose 0.5% after losing 0.3% Thursday.

Volume was slightly lower in the Nasdaq in the stock market today.

Among IBD’s 197 industry groups, losers led winners by a 15-2 ratio.

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Some defensive investments were trying to resist the Trump sell-off. The Dow Jones utility average lost only a penny Thursday but fell 0.6% midday Friday. The tobacco stock group advanced 0.9% after losing only 0.3% Thursday.

But in the context of tariffs, some traditionally cautious instruments, such as Food-Grain & Related, struggled. On Thursday, the food-grain group skidded 3.5%.  U.S. agriculture exports could face retaliatory measures in a protectionist environment.

American steel stocks surged Thursday but lost ground midday Friday. While the tariffs are expected to help U.S. steel makers, the market may have some difficulties pricing in the new reality.

Tariffs And Stock-Market History

Trump showed no signs of backing down. In a tweet on Friday, he insisted that “trade wars are good, and easy to win.”

Other U.S. presidents have used tariffs and import quotas on occasion, but no president has been as openly confident as Trump in using tariffs as a tool since Herbert Hoover. History shows that the Smoot-Hawley Tariff, signed in June 1930, led to reductions in both U.S. imports and U.S. exports.

While the current stock market has little in common with 1930, tariffs in 1930 didn’t help the U.S. economy or the Hoover-era stock market. The stock market looks ahead and the rising and falling prospects for Smoot-Hawley may well have contributed to the 1929 stock market crash. On Oct. 21, 1929, about a week before the crash, the Senate rejected a move to water down Smoot-Hawley.

Interestingly, in May 1930, more than 1,000 economists urged Hoover to veto the Smoot-Hawley Tariff because it would be “harmful to the country.” Hoover ignored them.

Polls have shown that currently about 93% of economists oppose tariffs.

Leading Stocks Head South

Meanwhile, in the 30-component Dow Jones industrial average, most stocks were down. Boeing (BA) and Caterpillar (CAT), two companies likely to be hurt by steel tariffs,  took hard hits for a second straight day.

Apple (AAPL) and the FANG stocks — Facebook (FB), (AMZN), Netflix (NFLX) and Alphabet (GOOGL) — fell without exception Thursday but were little changed Friday.

Economic Data

The University of Michigan’s consumer sentiment gauge for February came in at 99.7. The Street expected a reading of 99.5.

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Originally posted 2019-09-19 23:10:24.


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