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Tariff-ic Headache: Stocks Edge Higher in Wild Session

Suppose they gave a trade war and nobody came? That’s the question investors pondered on Tuesday. They’re hoping that President Trump’s “tariff tantrum” will subside.

The main indices bounced around today, before closing modestly higher. The Dow Jones Industrial Average was down 166 points at its session low and up 120 points at its session high. By the closing bell, the Dow, the S&P 500 and the tech-heavy Nasdaq had edged into the green.

Fears of a trade war have eased over the past two days, but they haven’t disappeared entirely. Today’s trading was volatile.

The indices in recent days have been prone to intraday twists and turns, as investors try to decipher the whims of the Trump administration. As Tweeter-in-Chief, Donald Trump has demonstrated the power to crush the stock market with a single tweet.

One ray of hope for investors today was the prospect of talks between North Korea and the U.S. Escalating tensions on the Korean peninsula have bedeviled markets for many months.

North and South Korea are scheduled to hold their first summit in more than a decade in late April, the South’s presidential office announced Tuesday. North Korea also expressed willingness to talk with the U.S. on normalizing relations. Traders heaved a sigh of relief. Trade wars are bad for business. Nuclear wars are worse.

Another tailwind for stocks is the growing resistance to Trump’s proposed tariffs on steel and aluminum. Republican and business leaders are fiercely condemning the trade measures. Most Democrats are opposed as well.

Ironically, trade tariffs are the sort of measures one would expect from a leftist Bernie Sanders administration, not a conservative Republican one. Investors are praying that establishment Republicans will find a way to coax Trump away from his populist policy threats.

The media yakkers…

Tune out the mainstream media’s misinformation on trade and tariffs. I’m often dismayed by the economically illiterate gibberish spouted by the Barbie and Ken dolls who pose as “journalists” on cable television.

Cable TV news thrives on drama and conflict to boost ratings. Complex topics such as international trade are reduced to easily digested sound bites.

In these choppy seas, you can navigate a steady course by focusing on the numbers that count: earnings reports and economic data. On those fronts, the news is mostly heartening.

Notable economic reports on the docket this week: MBA Mortgage Applications, ADP Employment Report, International Trade (Wednesday); Chain Store Sales, Jobless Claims, Bloomberg Consumer Comfort Index (Thursday); Employment Situation, Baker Hughes Rig Count (Friday).

In addition to the tariff controversy, investors are keeping an eye on this week’s forthcoming jobs reports. Therein lies the danger. It was last month’s jobs report that fueled concerns of rising inflation and triggered February’s correction. The payroll data showed wages growing at their fastest pace in more than eight years. The 12% market selloff ensued.

How will the tariff drama play out? Impossible to know. White House policy seems to change not just day by day, but hour by hour. My advice: Spend less time fretting about the endless succession of daily crises and more time planning long-term investment strategy.

The principles of shrewd investing — gauging the madness of crowds to pinpoint value as well as overvalue — are especially relevant in uncertain times like these.

Tuesday Market Wrap

  • DJIA: +0.04% or +9.36 points to close at 24,884.12
  • S&P 500: +0.26% or +7.18 points to close at 2,728.12
  • Nasdaq: +0.56% or +41.30 points to close at 7,372.01

Tuesday’s Big Gainers

  • Ameresco (NYSE: AMRC) +17.96%

Renewable energy firm posts strong earnings.

  • Ciena (NYSE: CIEN) +10.19%

Optical gear maker beats on earnings.

  • Baytex Energy (NYSE: BTE) +4.38%

Strong operating results boost energy producer.

Tuesday’s Big Decliners

  • Ares Management (NYSE: ARES) -9.50%

Analysts negative on asset manager’s stock offering.

  • American Realty Investors (NYSE: ARL) -8.64%

Analysts bearish on REIT.

  • Ryerson Holding (NYSE: RYI) -7.92%

Metals producer issues disappointing earnings.

Letters to the Editor

“I run a small start-up that’s still struggling. What’s a good business structure to adopt?” — Ken D.

I’d need to know more about the details of your business. More to the point, securities law prevents me from offering individualized advice. But I can impart the following guidelines.

As a general rule, if your business is a start-up or is expected to lose money during its initial phase, consider a Sole Proprietorship for the sheer sake of simplicity.

As soon as your firm starts turning at least a small profit, convert to an S-Corporation to take advantage of the pass-through status, the liability protection and the ability to save on Federal Insurance Contribution Act (FICA) taxes, which include contributions to federal Social Security and Medicare program taxes.

Once you’re firmly in the black, a C-Corporation will address any liability concerns and you can avail yourself of the different tax brackets between your corporation and your personal taxes. Remember, an overall lower tax burden also creates a business with a greater intrinsic value. That’s an important consideration, when planning your estate.

Tax season is upon us! Looking for ways to keep the IRS at bay? Drop me a line: mailbag@investingdaily.com

John Persinos is managing editor of Personal Finance and chief investment strategist of Breakthrough Tech Profits.

 

 

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