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Jul 11, 2018

U.S. Stock Markets at Close Report I CNBC.

cnbc.com

Dow drops about 200 points after US unveils new tariffs on Chinese goods

Fred Imbert, Alexandra Gibbs




Stocks closed sharply lower on Wednesday as a trade war between the U.S. and other major economies intensified, with the Trump administration unveiling new tariffs on Chinese goods.
The Dow Jones Industrial Average fell 218 points with Caterpillar, DowDuPont and Chevron as the biggest decliners. The 30-stock index was also on track to snap a four-day winning streak.
The S&P 500 dropped 0.7 percent as energy plunged more than 2 percent. Energy shares fell as crude shed 5 percent. The Nasdaq Composite declined 0.6 percent.
President Donald Trump's administration published late Tuesday a list of 10 percent duties on $200 billion worth of Chinese goods. The tariffs won’t come into effect immediately, but rather face a review process, with hearings taking place in mid-to-late August.
The announcement came just days after both nations imposed $34 billion worth of tariffs on each other.
Traders on the floor of the New York Stock Exchange Spencer Platt | Getty Images News | Getty Images
Traders on the floor of the New York Stock Exchange
"The sharp market reaction to last night’s announcement by the Trump administration ... shows how sensitive markets remain to any tariff news," said Jeffrey Kleintop, chief global investment strategist at Charles Schwab. Kleintop added that second-quarter results could "offer some insight into whether tariffs are having any actual impact on 'hard' data rather than in sentiment reflected in surveys and markets. So far, we haven’t seen any material impact."
Shares of Boeing and Caterpillar — two companies with high overseas revenue exposure — fell 1.9 percent and 3.2 percent, respectively. Chipmakers also pulled back as Nvidia, Intel and Advanced Micro Devices all dropped more than 1.5 percent.
Investors have been rattled recently by the escalation in trade relations. But Dubravko Lakos-Bujas, head of U.S. equity strategy at J.P. Morgan, thinks strong corporate earnings growth will outweigh the negative sentiment presented by those trade fears.
“Despite trade headlines, S&P 500 companies should deliver robust earnings on above-trend revenue growth and sharply higher margins,” Lakos-Bujas said in a note Wednesday. “While weaker overseas growth, stronger USD, and trade risks warrant some caution, consensus is likely too conservative considering rising disposable income ... and lower household expenses.”
Corporate earnings are expected to have risen 20 percent in the second quarter, according to FactSet. The earnings season got under way this week with PepsiCo reporting better-than-expected earnings on Tuesday. J.P. Morgan Chase, Citigroup and Wells Fargo are all scheduled to report later this week.
"You have to expect more volatility moving forward," said JJ Kinahan, chief market strategist at TD Ameritrade. "You have to listen to what the CEOs and CFOs say about these tariffs and how its impacting their businesses."
"It's almost like the dollar a few years ago," he said. "Back then, even Facebook said the strong dollar was killing them."
Global markets also fell on the new tariffs announcement. In Europe, the Stoxx 600 index slid more than 1 percent, while the Shanghai Composite dropped 1.8 percent. Treasury yields slipped — pushing prices higher — with the benchmark 10-year yield trading at 2.85 percent.
Trump is currently in Brussels attending a two-day NATO summit. During the first leg of his European trip, the U.S. incumbent has already made headlines by stating that “Germany is totally controlled by Russia,” describing how a number of “inappropriate” oil and gas deals had given Moscow too much influence over Berlin.
Shares of drug makers also fell after Pfizer said it will postpone price increases after a conversation with the president. Pfizer fell 0.6 percent, while Biogen slipped 0.2 percent. Merck declined 0.6 percent.
American Airlines fell nearly 8.1 percent after the company trimmed it s outlook for second-quarter revenue growth.
—CNBC’s Sam Meredith contributed to this report
  • Trading Nation: Key levels on the S&P 500 Matt Maley, Miller Tabak managing director, and Boris Schlossberg, BK Asset Management managing director, discuss key S&P 500 levels they're watching as the trade war heats up with China.
  • Trader says consumer discretionary stocks are about to breakout Todd Gordon of TradingAnalysis.com says consumer discretionary stocks are about to rally with the market.
  • What’s wrong with Walmart? Stacey Gilbert of Susquehanna and David Seaburg of Cowen discuss Walmart shares with Sara Eisen.
  • A mass rally held at Kim Il-sung Square in Pyongyang, North Korea, on August 9, 2017. Gina Sanchez of Chantico Global says a North Korean attack, should one occur, isn't likely to cause significant long-term market impact.
  • Boris Schlossberg of BK Asset Management says the ISM non-manufacturing report is key to watch ahead the jobs data released Friday.
  • When the dollar is weak, here's the sector that wins Chad Morganlander of Washington Crossing Advisors is watching the dollar this week and expects it'll begin to strengthen heading into the second half of the year.
  • Stacey Gilbert Stacey Gilbert is the head of derivative strategy at Susquehanna.
  • Managing Director, ACG Analytics
  • Rich Ross Managing Director, Head of Technical Analysis, Evercore ISI

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.
In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.
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