The markets closed higher on Friday but pared gains after news that Special Counsel, Robert Mueller, handed down indictments to 13 Russians and three companies he said conspired to meddle in US elections. The S&P 500, had broken free earlier in trading, ratcheting up further gains for the longest stretch since the start of 2018 buoyed by gains in technology and healthcare stocks.
The three main indexes had their best week performance since November 2016 for the Dow Jones industrial average and since December 2011 for both the S&P 500 and Nasdaq after bouncing higher in earlier trading. However, Mueller's announcement cast a pall over the market, dampening earlier exuberance. The Dow gained +0.08%, the S&P 500 edged up +0.04% and Nasdaq which had been powered by techs slipped -0.23%. The dollar firmed after five straight days of losses. MarketWatch's US Dollar Index which measures the dollar against six other currencies rose 0.56% to 89.11.
- Dow 25,219.38 +0.08%
- S&P 500 2,732.22 +0.04%
- Nasdaq 7239.47 -0.23%
- Russell 2000 1,545.59 +0.55%
- NYSE Composite 12,900.93 +0.34%
- Gold 1,351.1 -0.31%
- Oil WTI $61.63 +0.47%
The earlier market rally suggested that if the 1,000 point plunges of early February are firmly in the rear view mirror, then inflation is in the side mirror with the safety warning: “objects may be closer than they appear.”
In short, despite the muted reaction by Wall St, to the latest CPI data, future inflation worries may not be entirely unfounded. On CNBC, strategist Jim Paulsen predicted recent gains won’t last and said there could be a 15% correction on the near horizon. While Paulsen of Leuthold Group isn’t expecting a permanent rout, he is expecting more turbulence as a result of higher yields on the 10-year Treasury moving above 3%. He added the caveat that the market could go higher if the February job reports drops to 2.5%.
Credit Suisse’s US equity strategist, Jonathan Golub, on the other hand, expects double-digit stock market returns in 2018 with the S&P 500 and he puts investor’s unease with the rise in rates and potential for future inflation down to market strength. Golub was quoted: “This is the best quarter of [earnings] beats as far back as we have history…The naysayers I think right now are just on the wrong side of this.”
Trade shield for steel mulled by White House
The US Commerce Department released proposals to protect the US steel and aluminium industry on Friday. Among steel companies making big gains after the announcement were AK Steel rose +13.74% and United States Steel jumped +14.77%.
The report was prepared under under Section 232 of the Trade Expansion Act of 1962 after the US producers complained foreign dumping was hurting their business. Following investigations the report concluded "that the quantities and circumstances of steel and aluminium imports “threaten to impair the national security,” as defined by Section 232.
Recommendations comprised three alternatives for each metal and included:
- A global tariff of at least 24% on all steel imports from all countries, or
- A tariff of at least 53% on all steel imports from 12 countries (Brazil, China, Costa Rica, Egypt, India, Malaysia, Republic of Korea, Russia, South Africa, Thailand, Turkey and Vietnam) with a quota by product on steel imports from all other countries equal to 100% of their 2017 exports to the US
- A tariff of at least 7.7% on all aluminum exports from all countries, or
- A tariff of 23.6% on all products from China, Hong Kong, Russia, Venezuela and Vietnam. All the other countries would be subject to quotas equal to 100% of their 2017 exports to the United States
Secretary Wilbur Ross said in a statement, “I am glad that we were able to provide this analysis and these recommendations to the President.” President Donald Trump has until 11 April to make any decision on the recommendations. Ross added, “I look forward to his decision on any potential course of action.”