Trade tensions continue to weigh on US stocks

Blue chip stocks rose on Wall Street but investors' fears of the Trump administration’s protectionist trade agenda weighed on other benchmarks.

At the close of trading in New York, the Dow Jones Industrial Average was up 115.54 points, or 0.5%, to 24,873.66. During the session, the Dow traded in a 300-point range as the New York Times reported that special counsel Robert Mueller had subpoenaed the Trump Organisation to turn over documents on his Russia investigation.

However, the broader indexes lagged. The S&P 500 eased 0.1% to 2747.33, while the Nasdaq Composite shed 0.2% to 7481.74.

In the latest development on the trade front, President Donald Trump is reported to be considering a package of anti-China measures, including tariffs on some imports. China is not a major steel or aluminium exporter to the US but officials have blamed it for distorting both markets through excessive capacity.

Investors worry that more tariffs, along with aggressive responses from the European Union, could crimp growth around the world and put a damper on earnings among US conglomerates, manufacturers and other businesses.

Despite the trade fears, the economic outlook for the US and global economy remains buoyant, with the OECD earlier this week raising its projections.

Caterpillar climbs
Shares of industrial companies, which have sagged under the trade fears, were among the biggest gainers. Caterpillar climbed nearly 1%.

Health-care companies also traded higher, with UnitedHealth Group among the biggest movers, rising 2.1%. Shares of energy firms and utility companies declined on the elimination of a key tax benefit for some pipeline companies, .

Chemical companies, a sector that would face higher costs by constructing new facilities under the tariffs, were hit particularly hard, with Monsanto declining 3.6% and Mosaic falling 2.3%.

“Protectionist policies, at the end of the day, are bad for the market,” says Tom Manning, chief executive of FL Putnam Investment Management Co. “They can be inflationary and there’s not a lot of good that can come from those types of policies.”

While the continued strong economy attracts some investors, it also risks further inflaming investors’ worries of interest rates rising more quickly than anticipated.

“We’re clearly somewhere between the expansion and slowdown stages in the business cycle, but that alone doesn’t tell you whether you should be risk-on or risk-off,” says Fahad Kamal, senior market strategist at Kleinwort Hambros.

The Stoxx Europe 600 added 0.6%. France’s CAC 40 rose 0.65%, Germany’s DAX 0.9% and the UK’s FTSE 100 rose 0.1%.

In corporate news, the Anglo-Dutch consumer goods giant Unilever fell 1.8% after confirming it would consolidate its dual headquarters in Rotterdam. The company is currently based in both the Netherlands and London.

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