Concerns About Trade War May Continue to Hit Markets

By Investors Hub

The major U.S. index futures are pointing to a lower opening on Monday after turning higher over the course of the previous session.

Lingering concerns about a global trade war may weigh on the markets, as President Donald Trump plans to implement tariffs on steel and aluminum imports.

In a post on Twitter, Trump indicated that the tariffs on steel and aluminum would only be removed if the U.S. negotiates a ?new & fair? NAFTA agreement.

?We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed,? Trump tweeted.

He added, ?Also, Canada must treat our farmers much better. Highly restrictive. Mexico must do much more on stopping drugs from pouring into the U.S. They have not done what needs to be done. Millions of people addicted and dying.?

Trading activity may be somewhat subdued, however, as traders look ahead to the Labor Department?s monthly employment report due to be released on Friday.

After coming under pressure early in the session, stocks showed a significant turnaround over the course of the trading day on Friday. The major averages bounced well off their lows of the session, with the Nasdaq and the S&P 500 climbing into positive territory.

The major averages ended the session mixed, as the Dow climbed well off its worst levels but was unable to turn positive. While the Dow fell 70.92 points or 0.3 percent to 24,538.06, the Nasdaq jumped 77.31 points or 1.1 percent to 7,257.87 and the S&P 500 climbed 13.58 points or 0.5 percent to 2,691.25.

Despite the recovery on the day, the major averages all moved lower for the week. The Dow plunged by 3 percent, the S&P 500 tumbled by 2 percent and the Nasdaq slumped by 1.1 percent.

Bargain hunting may have contributed to the rebound on Wall Street, as the early weakness came on the heels of the sharp pullback seen over the three previous sessions.

The initial drop came as traders expressed concerns about the impact President Donald Trump’s plans to impose new tariffs on steel and aluminum imports will have on global trade.

Trump indicated Thursday that he plans to impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports.

The tariffs are likely to benefit U.S. steel and aluminum producers, although some officials have warned of retaliation by the European Union and China.

Trump shrugged off the concerns in a post on Twitter early Friday morning, calling trade wars “good” and “easy to win”

“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump said.

He added, “Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”

Following Trump’s announcement, several industry groups warned that the tariffs would lead to increased costs and hamper their ability to create jobs.

A steep drop by shares of McDonald’s (MCD) weighed on the Dow, with the fast food giant slumping by 4.8 percent.

The drop by McDonald’s came after RBC Capital Markets cut its price target on the company’s stock to $170 from $190 after a slow start for the chain’s new value menu.

Biotechnology stocks showed a substantial move to the upside on the day, driving the NYSE Arca Biotechnology Index up by 3.2 percent. The index rebounded after closing lower for three straight sessions.

Biogen (BIIB) and AbbVie (ABBV) turned higher despite voluntarily withdrawing their relapsing multiple sclerosis drug Zinbryta from the global markets.

Significant strength also emerged among natural gas stocks, as reflected by the 2.3 percent gain posted by the NYSE Arca Natural Gas Index. The strength in the sector came despite a modest decrease by the price of natural gas stocks.

Tobacco, semiconductor, and healthcare stocks also moved notably higher, while steel stocks pulled back following the strength seen in the previous session.