Concerns Over Rate Hikes and Trade Squash Stocks

President Trump's decision to slap steep tariffs on imported steel sparked concerns of a trade war

Mar 2, 2018 at 1:19 PM
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After snapping their best monthly win streak in years, stocks continued to struggle as the calendar turned to March. Focus early in the week centered on the congressional testimony of new Fed Chair Jerome Powell. Powell's suggestion that more than three rate hikes are possible in 2018 rattled markets and sparked another rise in bond yields. But it was President Donald Trump's announcement of steep tariffs for steel and aluminum imports on Thursday -- and his subsequent trade war tweet -- that really shook investor confidence, with the VIX soaring back above a key technical level.

Blue Chips Struggle Amid Market Dip

After all this the Dow , S&P 500 Index (SPX), and Nasdaq Composite (IXIC) are set for major weekly losses. A number of blue chips headlined the bearish action, including Walmart (WMT) and McDonald's (MCD). The former company saw its stock fall after its decision to raise the legal age to buy a gun, while MCD shares suffered a historically bad week that culminated in bearish analyst attention. General Electric (GE) stock continued to underperform, too, touching fresh lows, and the losses kept piling up for Procter & Gamble (PG).

However, Morgan Stanley is expecting fellow Dow stock Caterpillar (CAT) to bounce back from the broad-market sell-off and return to record levels. Apple (AAPL) also received a vote of confidence after Warren Buffett said Berkshire Hathaway (BRK.A) bought more shares of the iPhone maker than anything else over the past year. Elsewhere, fellow high-profile investor Bill Ackman has been buying another blue chip.

Retail Earnings Galore

This week was heavy in earnings releases from retailers. Wall Street cheered quarterly updates from Macy's (M) and Best Buy (BBY), while these two sector peers sold off. Options traders focused in on Gap (GPS) and Nordstrom (JWN) before earnings, and J C Penney (JCP) seemingly let down bullish speculators as the stock nosedived after earnings.

E-commerce companies were also making headlines. Amazon did so by making another billion-dollar purchase, and Etsy (ETSY) touched fresh highs thanks to impressive quarterly results. Not to be forgotten, eBay (EBAY) shares could be preparing to breakout.

Salesforce Sails to Record High; Valeant Sinks

Tech and healthcare stocks made notable moves, per the usual. Salesforce.com (CRM) led the way with its blowout quarter and subsequent all-time high from the shares. On the flip side, wearable tech maker Fitbit (FIT) touched record lows following a bleak quarterly update. Netflix stock, meanwhile, failed to capitalize on its newest European partnership. As for potential targets for options traders, this high-flying tech name could be one to consider, while put players have preferred this chip stock

In the healthcare space, investors digested a disappointing outlook from Valeant Pharmaceuticals (VRX). These fellow drug stocks also made notable post-earnings moves, while regulatory wins boosted shares of KemPharm (KMPH) and Achillion Pharmaceuticals (ACHN). Few stocks could match the success Tenax Therapeutics (TENX) had on Thursday, however, when the shares doubled in value.

25 Stocks to Target In March

Looking ahead, an avalanche of jobs data, including February's nonfarm payrolls report, will keep investors attention on the Fed and the path for future rate hikes. Even if the tariff headwinds carry over into next week, there are plenty of stocks out there with upside potential, including these 25 underloved names. We even compiled a list of stocks to buy in March, including these financial issues and one toy stock.

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