U.S. equities and stock exchange traded funds were relatively flat Thursday as traders grew wary of further political risks in response to President Donald Trump’s latest protectionist stance.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were 0.1% lower Thursday.
Stocks were bouncing between negative and positive territory for much of the day. Weighing on sentiment, Trump met with key lawmakers and said he would speed up talks to either renegotiate or replace the North American Free Trade Agreement, or NAFTA, reports Yashaswini Swamynathan for Reuters.
Other Trump actions, like labeling a refugee swap agreement with long ally Australia as a “dumb deal” and putting Iran “on notice” for firing a ballistic missile, have also shaken risk-on sentiment.
“We’ve had a good run, and now we’re seeing a major shift in sentiment where we have doubt creeping in,” Barry James, chief investment officer at James Investment Research, told the Wall Street Journal, arguing that much of the pro-growth news from a Trump administration has already been priced in.
U.S. markets have been stuck within range after a post-election bull rally on speculation that Trump would enact expansionary policies, such as tax cuts, reduced regulations and high fiscal spending. However, the market momentum has fizzled in recent weeks on Trumps more controversial actions like restricting travel to the U.S. and withdrawing from a trade deal.
“What you have is a tug-of-war between near-term positives in terms of economic data and earnings season juxtaposed against the confusion over what’s important in the first 100 days of the new administration and when will we get to see things like tax reforms,” Art Hogan, chief market strategist at Wunderlich Equity Capital Markets, told Reuters.
Meanwhile, the strong fourth quarter earnings season continues to support the loftier valuations in the equities market, with earnings of S&P 500 companies estimated to have risen 7.5%, the best growth in nine quarters, according to Thomson Reuters.
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