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Stocks dive after Trump promises tariffs on steel imports

Traders work on the floor of the New York Stock Exchange.
(Justine Lane / EPA/Shutterstock)

U.S. stocks dived Thursday in another dizzying day of trading after President Trump promised stiff tariffs on imported steel and aluminum. The move raised the threat of escalating retaliation by other countries and higher inflation. The Standard & Poor’s 500 index erased nearly all of its gains for the year.

Indexes bounced between modest gains and losses earlier in the day, until Trump told industry executives that they would “have protection for the first time in a long while” and that he planned to impose tariffs of 25% on steel imports and 10% on aluminum imports next week.

White House announces plan for heavy tariffs on imported steel, possibly triggering trade war with China »

“I don’t know if this will cause a trade war, and obviously that’s the fear,” said Lamar Villere, portfolio manager at investment manager Villere & Co. “But this is exactly what candidate Trump said he would do: He said he would be very protectionist and ‘America first.’ ”

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The Standard & Poor’s 500 index tumbled 36.16 points, or 1.3%, to 2,677.67 — losing at least 1% for the third straight day. The index had only four such days last year. The S&P 500, which had its best January in 20 years, is now up just 0.2% for the year.

The Dow Jones industrial average dropped 420.22 points, or 1.7%, to 24,608.98. The Nasdaq composite fell 92.45, or 1.3%, to 7,180.56.

As a candidate, Trump campaigned on an “America first” trade policy, and a big fear for investors has been that increasingly nationalistic governments will impose barriers that hurt the global economy and trade and that harm U.S. exporters’ profits. Apple, the most valuable U.S. company, got 63% of its sales from outside the United States in its latest fiscal year.

European Commission President Jean-Claude Juncker said the European Union will take retaliatory action if Trump goes ahead with his plan. “The EU will react firmly and commensurately to defend our interests,” he said.

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Shares of U.S. steelmakers surged on the tariff news. U.S. Steel rose 5.7% to $46.01. But shares of companies that use lots of steel fell, as did exporters.

Industrial companies in the S&P 500 fell 1.9%, the sharpest loss among the 11 sectors that make up the index. Aerospace giant Boeing retreated 3.5% to $349.69.

Stocks of smaller companies, which tend to do more of their business in the United States and may not feel as much pain from a global trade war, held up better than the rest of the market. The Russell 2000 index of small-cap stocks slipped 5.06, or 0.3%, to 1,507.39.

Bond prices rose as demand jumped for safer investments, which pushed yields down. The yield on the 10-year Treasury note sank to 2.81% from 2.86%.

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Stocks were higher earlier in the day after Federal Reserve Chairman Jerome Powell testified before Congress and appeared to calm one of the market’s main worries: that the Fed may get more aggressive about raising interest rates to beat down inflation amid the strengthening job market and economy.

Powell told the Senate Finance Committee that he does not see inflation in workers’ wages “at a point of acceleration.” He also said: “I would expect that some continued strengthening in the labor market can take place without causing inflation.”

Earlier in the week, Powell’s testimony helped send Treasury yields jumping and stocks tumbling when he said he was feeling more optimistic about the economy. Some traders took that as a signal that the Fed may raise rates more quickly than the market expected.

Worries about potentially higher rates and inflation have reintroduced markets to volatility after their unusually calm run in 2017 and early this year. At one point, the concerns helped knock the S&P 500 down 10% from its record high, set in late January.

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Patterson Cos. dived 23.7% to $24.11 on Thursday — the biggest loss in the S&P 500 — after it reported weaker earnings for the latest quarter than analysts expected and announced its chief financial officer was leaving. The company sells dental and animal health products.

Monster Beverage sank 14.4% to $54.22 after the energy drink company said its gross profit fell and some international customers cut back on purchases.

L Brands tumbled 13.9% to $42.49 after the owner of Victoria’s Secret forecast a smaller profit in 2018 than analysts expected.

Box plunged 23.3% after the cloud storage company issued a disappointing forecast.

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Salesforce.com rose 2.7% to $119.43 after the customer-management software company had a better-than-expected quarter and gave solid 2018 forecasts.

Best Buy climbed 3.9% after posting a good holiday season and issuing a rosy forecast.

Oil prices continued to drop after a report on Wednesday showed more crude supplies in inventories last week than analysts expected. Benchmark U.S. crude fell 65 cents to settle at $60.99 a barrel. Brent crude, the international standard, fell 90 cents to $63.83 a barrel.

Natural gas rose 3 cents to $2.70 per 1,000 cubic feet. Heating oil fell 2 cents to $1.89 a gallon. Wholesale gasoline fell 3 cents to $1.90 a gallon

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Gold dropped $12.70 to $1,305.20 an ounce. Silver fell 13 cents to $16.28 an ounce. Copper fell 1 cent to $3.12 a pound.

The dollar fell to 106.24 yen from 106.66 yen. The euro rose to $1.2255 from $1.2203, and the British pound slipped to $1.3768 from $1.3771.

In overseas markets, France’s CAC 40 slid 1.1%. Germany’s DAX sank 2%. The FTSE 100 in London dropped 0.8%. In Asia, Japan’s Nikkei 225 lost 1.6%, and Hong Kong’s Hang Seng rose 0.6%.


UPDATES:

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2:20 p.m.: This article was updated with additional closing prices and context.

1 p.m.: This article was updated with closing figures, context and analyst comment.

11:20 a.m.: This article was updated with market figures and context.

11:10 a.m.: This article was updated throughout with additional details.

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This article was originally published at 7:40 a.m.


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