U.S. Stocks Poised For Initial Sell-Off On Trade War Concerns

Reflecting concerns about a global trade war following President Donald Trump’s tariff announcement, stocks are likely to see an initial sell-off on Thursday. The major index futures are currently pointing to a sharply lower open for the markets, with the S&P 500 futures down by 3.7 percent.

The steep drop by the futures comes after Trump delivered a highly anticipated speech from the White House Rose Garden on Wednesday outlining his plan to impose sweeping tariffs on U.S. trade partners.

Trump’s “reciprocal tariff” plan calls for a baseline 10 percent tariff to be imposed on all U.S. imports except those compliant with the United States-Mexico-Canada Agreement.

Certain countries deemed the “worst offenders” will face much higher tariffs, with countries like Cambodia, Laos, Madagascar and Vietnam set to be charged nearly 50 percent.

China, which will face a 54 percent tariff rate when the new levies are combined with existing duties, has vowed to take countermeasures.

Canada and the European Union are also preparing countermeasures, leading to concerns about a trade war that could fuel inflation and damage the global economy.

On the trade front, the Commerce Department released a report showing the U.S. trade deficit narrowed in the month of February after soaring to a record high in January.

The report said the trade deficit decreased to $122.7 billion in February after spiking to a revised $103.7 billion in January.

Economists had expected the trade deficit to fall to $123.5 billion from the $131.4 billion originally reported for the previous month.

The smaller trade deficit came as the value of exports surged by 2.9 percent to $278.5 billion, while the value of imports was virtually unchanged at $401.1 billion.

A separate report released by the Labor Department unexpectedly showed a modest decrease by first-time claims for U.S. unemployment benefits in the week ended March 29th.

Shortly after the start of trading, the Institute for Supply Management is scheduled to release its report on service sector activity in the month of March.

The ISM’s services PMI is expected to edge down to 53.0 in March from 53.5 in February, but a reading above 50 would still indicate growth.

Stocks once again recovered from an early slump to end Wednesday’s trading mostly higher, adding to the gains posted in the previous session. The major averages climbed well off their lows to end the day firmly in positive territory.

The major averages gave back ground in early afternoon trading but moved back to the upside going into the close. The Nasdaq advanced 151.16 points or 0.9 percent to 7,601.05, the S&P 500 climbed 37.90 points or 0.7 percent to 5,670.97 and the Dow rose 235.36 points or 0.6 percent to 42,225.32.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index plunged by 2.8 percent, while Hong Kong’s Hang Seng Index slumped by 1.5 percent.

The major European markets have also shown significant moves to the downside on the day. While the French CAC 40 Index is down by 2.8 percent, the German DAX Index is down by 2.1 percent and the U.K.’s FTSE 100 Index is down by 1.5 percent.

In commodities trading, crude oil futures are plummeting $4.88 to $66.83 a barrel after climbing $0.51 to $71.71 a barrel on Wednesday. Meanwhile, after jumping $20.20 to $3,166.20 an ounce in the previous session, gold futures are plunging $76.60 to $3,089.60 an ounce.

On the currency front, the U.S. dollar is trading at 145.77 yen versus the 149.28 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1099 compared to yesterday’s $1.0853.

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