Stocks Lower as Trump Threatens to Go All in on Tariffs Against China

Trump also said the strong gains in the stock market since his election give him the opportunity to wage a trade war, noting: “We’re playing with the bank’s money.” U.S. Treasury yields rose on Friday as investors ignored criticism of U.S. Federal Reserve monetary policy by President Trump.
James Hyerczyk
U.S. Stock Market
U.S. Stock Market

The major U.S. equity indexes closed lower across the board on Friday but in a limited range on low volume. Supporting the markets were strong quarterly results from bellwether stocks like Microsoft and Honeywell. Helping to limit gains were fresh threats by President Donald Trump to increase tariffs on China.

In the cash market, the benchmark S&P 500 Index settled at 2801.83, down 2.66 or -0.09%. The blue chip Dow Jones Industrial Average finished at 25058.12, down 6.38 or -0.03% and the tech-driven NASDAQ Composite closed at 7819.85, down 5.45 or -0.07%.

For the week, the S&P 500 Index and NASDAQ Composite closed slightly lower while the Dow rose 0.1 percent to post its first three-week winning streak since January.

The S&P 500 Index was dragged down by losses in the real estate and utilities sectors. They likely fell victim to rising interest rates. The Dow was helped by gains in Microsoft which offset losses in IBM.

From a micro point of view, Microsoft reported better-than-expected earnings late Thursday which carried over into Friday’s trade. The price action was driven by strong revenue guidance. The company’s stock rose 1.8 percent and hit a record. Honeywell shares also rose 3.8 percent on stronger-than-expected earnings and revenue.

Shares of General Electric fell 4.4 percent. Although the company reported a stronger-than-expected profit, it represented a 30 percent drop year over year.

From a macro point of view, about 16.4 percent of S&P 500 companies have released their latest quarterly results, with 83 percent of them betting analyst expectations, according to FactSet

Trade Dispute Update

On Friday, President Trump said he is ready to put tariffs on every Chinese good coming to the U.S. if necessary.

“I’m ready to go to 500,” the president told CNBC’s Joe Kernen in a “Squawk Box” interview.

Trump also said the strong gains in the stock market since his election give him the opportunity to wage a trade war, noting: “We’re playing with the bank’s money.”

U.S. Treasury Markets

U.S. Treasury yields rose on Friday as investors ignored criticism of U.S. Federal Reserve monetary policy by President Trump.

The 30-year Treasury bond climbed above 3 percent, hitting its highest level since late June. The benchmark 10-year Treasury note settled at 2.895, up 0.0048 and the 2-year Treasury note yield climbed to 2.595 percent.

On Thursday, Trump told CNBC’s Joe Kernen he was not thrilled the Fed was raising rates. “I am not happy about it. But at the same time I’m letting them (the Fed) do what they feel is best,” the president said.

On Friday, Trump continued his criticism, tweeting:  “The United States should not be penalized because we are doing so well. Tightening now hurts all that we have done. The U.S. should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates – Really?”

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