Stock Market News For Mar 26, 2018

Fears of an ensuing trade war between the U.S. and China led to grievous losses for the benchmarks on Friday. Trade related concerns were heightened after President Trump imposed hefty import tariffs on goods worth billions of dollars. As a result, all three major indices posted their biggest weekly loss since the week of Jan 8, 2016. Further, technology stocks, which have been driving the markets this year as well as in 2017, took a massive hit, with Facebook at the helm of carnage. Fears about a possible trade coupled and doubts regarding the Fed’s ability to protect the economy from slipping into recession as it normalizes monetary policy from crisis-era levels, also saw the CBOE VIX surging nearly 57%.

How did the Benchmarks Fare?

The Dow Jones Industrial Average (DJI) decreased 1.8%, or 425.62 points, to close at 23,533.20, its lowest close since November 2017. The S&P 500 lost 2.1% to close at 2,588.26. The tech-laden Nasdaq Composite Index closed at 6992.67, decreasing 2.4%. The fear-gauge CBOE Volatility Index (VIX) increased 6.6% to close at 24.87. Advancers outnumbered decliners on the NYSE by a 1.11-to-1 ratio. On Nasdaq, a 1.37-to-1 ratio favored advancing issues.

U.S. Imposes $60 Billions in Tariffs on China

President Donald Trump finally set into motion tariffs on up to $60 billion of Chinese imports on Thursday. Trump has been quite vocal about his ‘America First’ agenda, a culmination of his longstanding view that weak U.S. trade policies have affected the country’s workforce and increased the federal deficit. Consequently, China too announced plans for reciprocal tariffs on $3 billion of imports from the United States, giving rise to fears of an ensuing trade war.

Given this scenario, investors preferred to stay away from stocks whose profits could be affected if the price of industrial goods rose. As a result, shares of steelmakers and aluminum producers continued to decline sharply throughout the week. Shares of United States Steel Corporation (NYSE:X) and Century Aluminum Company (NASDAQ:CENX) lost 15% and 20%, respectively for the week, while Caterpillar Inc. (NYSE:CAT) fell 7.8%. Caterpillar has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Facebook Fiasco, FANG Stocks Decline

The tech sector, which had been driving the markets this year and in 2017, continued to suffer throughout the week. Shares of Facebook Inc. (NASDAQ:FB) took a massive hit after the company’s image was tarnished following an alleged data misuse scandal that affected more than 50 million users. So much so, that Facebook’s shares lost 6.8% on March 19, its steepest decline in four years and its third-worst weekly fall.

As the drama continued to persist, Facebook’s shares fell almost 14% over last week. The recent incident led to fears of a regulatory clampdown on not only the social media giant but also other major tech companies. The Tech XLK declined 2.7% on Friday. The NYSE Fang index, which represents the large-cap tech shares that had so long driven stock gains, had declined 10% by Friday from the all-time high reached this year, thus entering correction territory.

Bank Shares Suffer Weekly Losses

Tariff news coupled with rising interest rates continued to see government bonds strengthening for the second week in a row. As a result, bank shares took a hit. The gap between short- and long-dated U.S. Treasury notes continued to narrow, owing to the recent pullback in bond yields, which fall as prices increase. This hurt lender’s profits and on Friday, the KBW Nasdaq Bank Index of large U.S. lenders fell 3.3%, down 8% for the week.

Weekly Roundup

All the three major benchmarks declined over the week. The Dow tanked 5.7%, registering its biggest weekly loss since January 2016 on a week-to-date basis. Also, S&P 500 and Nasdaq dropped 6% and 6.5%, respectively. Further, the week also saw eight out the 11 S&P 500 sectors entering correction territory.

The volatile week started on a low point following concerns over Facebook’s policies regarding privacy of user data and the company’s alleged data misuse affecting more than 50 million users. However, markets gained traction on Tuesday supported by a rally in energy shares after oil prices settled at their highest level for the month only to end the week in red following the quarter-point rate hike by the Fed and Trump’s decision to imposition tariffs on China worth billions of dollars.

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