U.S. stocks traded lower Thursday, with the U.S. decision to impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico reigniting trade-war worries.
And oil, which helped drive a rally for stocks Wednesday, remained under pressure after weekly supply data.
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What have the main benchmarks done?
The Dow Jones Industrial Average DJIA, -0.65% fell 260 points, or 1%, to 24,416, while the S&P 500 SPX, -0.21% declined 0.5% to 2,712. The Nasdaq Composite COMP, +0.30% COMP, +0.30% COMP, +0.30% lost its grip on positive territory to trade 0.1% lower at 7,447.
A rally for oil prices and an easing of worries about Italian politics drove a rally for stocks on Wednesday, with the Dow climbing 306.33 points, or 1.3%, to close at 24,667.78, taking back most of Tuesday’s 392-point drop. The S&P 500 gained 1.3%, also recovering its losses from the prior session. The Nasdaq Composite was up 0.9%.
With one session left to close out May, the Dow is set to mark a 1% monthly rise, the S&P 500 is poised to gain 2.3% and the Nasdaq is set to book a 5.4% increase. An even bigger gain is in store for the Russell 2000 index of small-cap stocks RUT, -0.23% , which is set to gain 6.7%. The index finished at an all-time high on Wednesday, up 1.4%, to 1,646.36, and rose in early action Thursday before retreating 0.2%.
Read: Why bulls are betting on small-cap stocks to continue their winning ways
What’s driving markets?
The U.S. will impose tariffs on steel and aluminum products from the EU, Mexico and Canada beginning Friday, Commerce Secretary Wilbur Ross said. Canada and Mexico had previously received temporary exemptions as negotiators worked on a new version of the North American Free Trade Agreement, or Nafta.
Read: Trump ready to pull tariff trigger on EU — what analysts say investors should expect
The EU has announced plans for its own retaliatory measures, with classic American industries such as whiskey and motorcycles potentially under threat.
Read: Trump wants to bar German cars from U.S.: report
The latest Italian headlines indicated that President Sergio Mattarella will give populist leaders more time to form a government, a move that could stave off fresh elections, the threat of which triggered an early-week selloff for global markets.
What are analysts saying?
The initial round of tariff threats by the Turmp administration and the promises of retaliation by trade partners earlier this year were initially viewed by investors as opening gambits in negotiations that would lead to agreements, said Art Hogan, chief market strategist at B. Riley FBR.
“I think we’re at that point in time where the market had worked under the assumption that this was the ‘art of the deal,’ and now it feels like we’re moving backwards not forwards,” Hogan said, which needs to get priced back into the market.
Which stocks were in focus?
Steel and aluminum stocks rallied, though most are down sharply from levels seen following the Trump administration’s initial tariff announcements in March. Shares of AK Steel Holding Corp. AKS, +0.86% rose 0.9%, while U.S. Steel Corp. shares X, +3.26% advanced 3.3% and Nucor Corp. NUE, +1.11% advanced 1.2%.
Shares of General Motors Co. GM, +10.57% rose more than 10% after the car maker said the SoftBank Vision Fund plans to invest $2.25 billion in its self-driving unit. Shares of electric-car maker Tesla Inc. TSLA, -1.70% , meanwhile, dropped 2.1%.
Several retailers reported earnings. Dollar General Corp. shares DG, -7.96% slid 7.8% after the discount retailer posted disappointing revenue and same-store sales. Meanwhile, Dollar Tree Inc. DLTR, -11.79% shares dropped 12% after results.
Sears Holdings Corp. SHLD, -9.50% fell nearly 10% after the struggling department-store chain swung to a fiscal first-quarter loss and revenue fell sharply.
Read: Yes, Sears is likely to collapse, but its biggest stakeholder will be just fine
Express Inc. EXPR, -4.69% fell 4%, despite earnings that beat estimates.
Lululemon Athletica Inc. LULU, +0.16% , Ulta Beauty Inc. ULTA, -1.27% and Costco Wholesale Corp. COST, +0.04% are due to report quarterly results after the market close.
In potential fallout from trade-war headlines and possible retaliation from the EU, shares of Harley-Davidson Inc. HOG, -1.91% fell 1.5%. And some U.S. automobile makers could be in the spotlight as their European counterparts came under pressure over trade fears, with Daimler AG DAI, -1.92% off 2% in Europe. Ford Motor Co. F, -0.43% declined 0.4%.
Read: VW beats deadline for U.S. emissions remedy
Which economic reports are on tap?
The PCE index, the Federal Reserve’s preferred inflation gauge, rose 0.2% in April, data showed Thursday, as did the core rate that strips out energy and food prices. Over the past 12 months, the rate was unchanged at 2%, while the core rate was at 1.8%.
Consumer spending jumped 0.6% after a revised 0.5% gain in March. Economists surveyed by MarketWatch had forecast a 0.4% rise.
First-time jobless claims fell 13,000 in the week ended May 26 to 221,000, compared with a forecast of 225,000.
The Chicago purchasing managers index for May jumped 5.1 points to 62.7, its highest reading since January.
Separately, U.S. pending home sales fell 1.3%, the National Association of Realtors said, and mortgage rates were seen to have halted a long upward march.
See: MarketWatch’s economic calendar
Check out: MarketWatch’s Economic Calendar
What are other markets doing?
The pan-European Stoxx Europe 600 Index SXXP, -0.62% SXXP, -0.62% was off 0.7%, while Italy’s FTSE MIB stock benchmark I945, -0.06% declined 0.6%.
The euro EURUSD, +0.0943% EURUSD, +0.0943% EURUSD, +0.0943% EURUSD, +0.0943% , while the ICE U.S. Dollar Index DXY, -0.05% was 0.1% lower at 93.813.
The yield on the 10-year Treasury note TMUBMUSD10Y, -0.51% was down 1.5 basis points at 2.829%. Gold futures GCM8, -0.02% edged higher, while U.S. oil futures CLN8, -1.03% were down 1.5% ahead of supply data.