U.S. Stocks Weaker on Trump Policy Concerns
Stocks were down on Friday on light profit-taking and position-squaring ahead of the week-end and President Donald Trump’s speech to Congress next week. At the mid-session, the blue chip Dow Jones Industrial Average was trading 20754.27, down 56.05 or -0.27%. The benchmark S&P 500 Index was at 2358.83, down 4.98 or -0.21% and the NASDAQ Composite was off around 9.37, or -0.16% at 5826.14.
Investors are also becoming concerned about Trump’s ability to accomplish his agenda including tax reform, softer regulation and aggressive fiscal spending. There are still lingering issues over the repealing of Obamacare and the appointment of a new Supreme Court justice.
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Economic News
U.S. new home sales rose 3.7 percent in January, below the expected increase of 6.3 percent. Consumer sentiment in the U.S. reached 96.3 in February, slightly above an estimate of 96.
The new home sales data showed Americans bought more new homes in January after a steep fall-off in December that may have been tied to the Fed’s rate hike. The quick recovery this month is a sign the housing market is healthy despite the rise in mortgage rates.
According to the Commerce Department, new home sales rose 3.7 percent to a seasonally-adjusted 555,000 units. That is 5.5 percent higher than a year ago. Economists had forecast a 6.3 percent increase.
The University of Michigan consumer sentiment gauge was up in February but remained below the decade peak recorded in January. “Overall, the Sentiment Index has been higher during the past three months than any time since March 2004. Normally, the implication would be that consumer expected Trump’s election to have a positive economic impact,” said Richard Curtin, Surveys of Consumers chief economist, in a release.
Gold
April Comex gold futures reached a 3 ½ month high on Friday after the U.S. Dollar hit a one-week low. The main catalyst behind the break in the dollar and the subsequent rise in gold prices were comments from Treasury Secretary Steven Mnuchin. He said that any steps U.S. President Donald Trump’s administration takes on policy would probably have only limited impact this year, although he wants to see tax reform passed by August.
Mnuchin’s comments didn’t sit well with some investors who were counting on Trump’s policies to stoke growth and inflation this year. However, the reaction by U.S. Treasury and dollar investors suggests there are some concerns about the direction of interest rates. In other words, any problems with Trump’s policies will likely mean the Fed will delay hiking rates. This would make gold a more attractive investment.