March 2, 2018 Market Outlook

Trump’s Tariff Plan Sends U.S. Stocks Tumbling

For the third straight session, the major U.S. benchmarks finished sharply lower on Thursday. U.S. President Donald Trump’s plan impose tariffs on steel and aluminum imports immediately raised concerns about protectionist trade policies that could harm American corporations and consumers.

The Dow Jones tumbled 420.22 points to close below the 25,000 mark while the Nasdaq Composite index gave up 92 points to settle at 7,180.56. The S&P 500 declined the least by 36.16 points to 2,677.67.

Even Trump’s top advisers fear retaliatory measures by other countries, including key U.S. allies that would be affected by the steep tariffs: 25% on steel and 10% on aluminum. According to some analysts, the move can boost American steel and aluminum manufacturers but will crush the rest of the market.

Investors Rethink Stock Price Valuations

While U.S. corporate profits are on track to achieve a growth of almost 20% this year, investors are struggling on how to value those profits with price-to-earnings estimates. The issue of valuation resurfaced due to the rise in interest rates and bond yields, and concerns about increasing inflation.

The yield on the benchmark 10-year U.S. Treasury note US10YT=RR is approaching 3% and it has driven investors to rethink how to price stocks.

Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis, said, “We are going to get good earnings coming through. The problem is we are going to lose the value on those earnings.”

Next Friday’s U.S. employment report for February could be the test for equity valuations. Wage gains sparked inflation concerns that set off a jump in yields and drop in stocks.

Boeing Steers Clear of Market Turbulence

Boeing (BA), the Dow Jones’ best-performing stock in 2017, has been able to steer clear of the recent market turbulence.  The shares of the aerospace and defense giant are up 18.58% year-to-date, making it the best performer in the blue-chip index so far in 2018.

Strong airline orders for its 737 MAX 8 and 787 Dreamliner planes are helping offset poor sales in its defense business which dropped by 7% in 2017. Boeing is expecting that sales in defense, space and security will slightly improve this year. Its commercial airplane unit is forecasted to bring in 62% of overall revenue while the service division will provide the rest.

Zuckerberg Sold $500M FB Shares to Fund CZI

Facebook Inc. (FB) CEO Mark Zuckerberg sold nearly $500 million in the company’s shares in February. The purpose of the sale is to fund the Chan Zuckerberg Initiative (CZI), his philanthropic investment vehicle set up in December 2015 with his wife Priscilla Chan.

Zuckerberg sold 685,000 shares worth $125.4 million in the last three days of February, bringing his total sales in the month to about 2.7 million shares worth $482.2 million. Reuters made the calculations based on the two security filings on Thursday.

The Facebook CEO began the process of funding the Chan Zuckerberg Initiative in September. CZI’s work is in science, education, and issues related to justice and opportunity.

NWS Issues Warning on Massive Storm This Weekend

The National Weather Service (NWS) warns of a massive storm this weekend as heavy wind, rain, and snow are expected to hit the Northeast region on Friday.The approaching storm is expected to undergo “bombogenesis.” Meteorologists use the term to describe storms that undergo a quick drop in pressure, which makes them more intense.

According to NBC Boston, residents in the coastal town of Scituate, Mass., have been asked to evacuate by 9 a.m. Eastern time on Friday. The National Guard has activated 200 members to prepare for storm rescues. NWS added that wave heights can be as high as 30 feet while wind speeds could exceed 50 mph.

People in New Jersey are boarding up their homes. A coastal flood watch is now in effect in Maryland and Delaware between 5 a.m. Friday through 2 a.m. Sunday. High-wind watches stretch from Maine to Virginia, where residents can expect downed trees and power outages. The Washington area might experience the windiest Friday as the storm would bring in 60 mph wind gusts.

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