Solid Month Ends with New Round of Trade Fears

Trade war concerns resurfaced on Thursday...but this time it had nothing to do with China. The Trump administration announced that it would be imposing tariffs on steel and aluminum for U.S. allies Canada, Mexico and the EU. The responses from those countries were swift and stern. 

The response from the market, though, was not as severe as might be expected.

The major indices were definitely down on Thursday, but it wasn’t the frightened plunge that we’ve become accustomed to on this issue. It looks like the market was expecting something like this sooner or later. 

The Dow dipped by 1.02% (or about 250 points) to 24,415.8, while the S&P was off 0.69% to 2705.3. The NASDAQ was only down by 0.27% to 7442.1. The Russell 2000, which hit another new record just yesterday, slipped 0.87% to 1633.6. 

“But just like Italy I’m hoping markets calm on this news,”said Jeremy in Counterstrike. “In my opinion, this is Trump playing hardball to get a deal from everyone in the world on trade. The market is getting used to this notion, otherwise we would have been down a lot more.” 

Despite this rough ending, the major indices still produced a second straight month with gains. The NASDAQ jumped by about 5.3% in May, while the S&P increased 2.2% and the Dow rose about 1%. These performances marked a dramatic improvement over April, which was the first positive month since January but only saw gains of less than 0.5% for each of the indices. 

Now we head into Friday with the NASDAQ up a bit for the week, but the Dow and S&P both down. The big news tomorrow is likely to be the employment situation report (unless there's more news on trade or some other headline). The last reading was considered a "goldilocks" report, as it was strong enough for the employment rate to dip below 4% but not enough to accelerate the Fed's rate hike plans. 

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