U.S. markets regained their footing March 7, despite the previous night's news that President Donald Trump's top economic adviser and free trade advocate Gary Cohn resignation, raising concerns that a global trade war could follow the planned imposition of aluminum and steel tariffs.
The S&P 500 Index was down 0.05% to 2,726.80, after falling as much 0.95% in midday trading in New York. The Nasdaq Composite Index finished up 0.33%. Yields on the benchmark 10-year U.S. Treasury rose somewhat — standing at 2.882% after hitting 2.865% earlier in the day. Bond yields rise as prices fall.
The dollar also fell with the New York Board of Trade Dollar Index declining by 0.05% to 89.57.
With the departure of Cohn, "there are now concerns that any moderating influence on the President has disappeared, meaning that the U.S. administration's reaction function has now become much more unpredictable," said Michael Hewson, chief market analyst at CMC Markets UK, in a note.
And, if tariffs or other trade barriers become more widespread, "it would put the Fed in a difficult position as inflation would be rising above the Fed's comfort zone while real GDP growth would likely be slowing," Wells Fargo Securities said in a note.
Europe is already drawing up a list of potential targets for retaliatory tariffs, including Harley-Davidson motorcycles and Levi's blue jeans.
The ADP payroll report, considered a preview of the Labor Department's employment report, next due March 9, came in higher than expected at 235,000. With the Federal Reserve already expected to raise rates at least three times this year, employment numbers and, more importantly, wage growth will be a critical indicator of near-term monetary policy.
European markets rallied after opening lower. London's FTSE 100 was up 0.16%, Germany's DAX rose 1.09%, but France's CAC 40 slipped 0.34%. The Stoxx 600 index of European stocks was little changed.
Italy's FTSE MIB Index jumped 0.6%, recovering from heavy losses March 5. The eurozone's third-largest economy faces the possibility of prolonged political gridlock after Italy's prime minister said his center-left Democratic Party will shun coalition talks with anti-establishment parties.
Japan's Nikkei 225 Index closed down 0.77%, China's Shanghai Composite Index finished 0.55% lower, and Hong Kong's Hang Seng Index fell 1.03%.
