S&P 500 gains on Friday but posts weekly losses on trade war fears

NEW YORK — The S&P 500 ended another turbulent week on an upbeat note on Friday, but major indexes posted their worst week of losses since early February as President Donald Trump's threat to impose import tariffs on steel and aluminum rattled investors. 

The gains on Friday came as investors who had been spooked by the prospect of a global trade war backed off those concerns and noted a trade war was far from certain at this point.

Trump on Thursday threatened a 25 per cent tariff on steel imports and 10 per cent on aluminum without exemptions for any countries, igniting a sell-off in a market already on edge over rising US interest rates and bond yields.

Trump struck a defiant tone on Friday, saying trade wars were "good, and easy to win", and US Commerce Secretary Wilbur Ross, appearing on CNBC, said tariffs would have a "trivial effect".

Phil Orlando, chief equity strategist at Federated Investors in New York, said Trump's announcement was made to call everyone's attention to the US trade deficit but investors decided that a full-blown global trade was not going to happen. 

"For a real estate guy like that, you pound the podium, you rattle some sabers, you get everybody's attention and then you negotiate back to some reasonable midpoint."

The tariffs could dampen profits for everything from car makers to beer companies and result in higher prices for consumers.

Shares of big US steel companies and manufacturers were under pressure on uncertainty over the effects of tariffs.

Shares in Caterpillar, a buyer of raw materials and a big exporter of construction machinery products, were down 2.6 per cent after falling 2.8 per cent in the previous day's session. General Motors was down 1 per cent.

The Dow Jones Industrial Average fell 70.92 points, or 0.29 per cent, to 24,538.06, the S&P 500 gained 13.58 points, or 0.51 per cent, to 2,691.25 and the Nasdaq Composite added 77.31 points, or 1.08 per cent, to 7,257.87.

For the week, the S&P 500 dropped 2 per cent, while the Dow was down 3 per cent and the Nasdaq fell 1 per cent. Wall Street had posted gains in the previous two weeks as it recovered from its steep early-February sell-off.

Those losses in early February pushed the S&P 500 down more than 10 per cent from a January 26 record high, confirming the market was in a correction.

The tariffs are unlikely to significantly hurt Corporate America's overall earnings, according to stock market strategists, who were not immediately adjusting their profit estimates following Trump's announcement.

"The impact on total corporate earnings first would be driven by the impact on the economy," said Keith Parker, US equity strategist for UBS in New York.

McDonald's dropped 4.8 per cent after RBC lowered its price target on the stock and cut its 2018 earnings estimate, citing a disappointing early sales impact from McDonald's value menu. The stock was the biggest drag on the S&P and the Dow. 

J.C. Penney Co. Inc. shares fell 5.4 per cent after the department store chain missed same-store sales estimates.

Advancing issues outnumbered declining ones on the NYSE by a 1.69-to-1 ratio; on Nasdaq, a 2.99-to-1 ratio favored advancers.

The S&P 500 posted one new 52-week high and 25 new lows; the Nasdaq Composite recorded 59 new highs and 65 new lows.

About 7.7 billion shares changed hands on US exchanges. That compares with the 8.4 billion daily average for the past 20 trading days, according to Thomson Reuters data.