Fears of trade war and inflated consumer prices from higher costs on cars, planes, construction and cans (goodbye, cheap beer!) joined anxiety over interest rates, sending both the Dow Jones industrial average and broader S&P 500 stock index down about 1% Friday morning, with the Dow landing slightly negative and the S&P slightly positive by market close. The drop follows President Donald Trump announcing major new tariffs on steel and aluminum imports Thursday, also rattling international markets.
Trump’s move has sparked concern over retaliation, as Yahoo! Finance reported, if countries were to punish one other, hurting businesses, workers and consumers alike. The European Union’s trade chief said any policy targeting Europe would be “deeply unfair,” as Reuters reported, and the foreign minister of Canada — a top buyer of U.S. goods — called the new policies “absolutely unacceptable.” Brazil, another major importer of steel to the U.S. (China, a trade partner Trump has long accused of taking “advantage,” is not in the top ten) warned it would consider a “multilateral or bilateral” response to protect itself.
But while trade war worries have captured the attention of investors, it’s not the only potentially market moving story this week, which saw calls for gun control sweeping the nation. Companies announced policy changes, including Walmart, LL Bean and Dick’s Sporting Goods, which said they’d take steps to restrict or limit gun sales. The outdoor sporting goods giant REI announced it would no longer make orders from popular brands like CamelBak that are owned by conglomerates with gun operations.
Here are the six biggest money stories you may have missed this week and how they might affect your bottom line.
1. Trump’s tariffs could spark trade war and hike prices for beer, soda, cars — and more
The news: Trump announced he would be instituting a 25% tariff on steel and a 10% tariff on aluminum. Tariffs — taxes on imports — have in the past often led to higher costs for consumers. Among other things, beer and cars could get more expensive thanks to the new costs associated with the raw materials.
The takeaway: Free trade has been at the center of U.S. economic policy for the better part of a century, both because it encourages international security and because the costs associated with tariffs are widely believed to be passed on to consumers.
Trump’s protectionism has put him at odds with the business community, and according to the Washington Post, the decision has left the president’s advisers divided. Trade adviser Peter Navarro was recently promoted to a new White House post where he is no longer under the thumb of Gary Cohn, the president’s top economic aide and a free trader. Navarro’s ideas are at odds with those of most economists; in fact, he has, on some occasions, been unable to name a single economist who agrees with him.
2. Equifax says 2.4 million more consumers affected in data breach
The news: Equifax announced Thursday that 2.4 million more consumers had partial driver’s license information stolen in 2017’s breach, bringing the total number affected to nearly 148 million people.
The takeaway: Some lawmakers fear the amount of personal information released in the Equifax breach may end up making the company more profitable in the long run. With nearly half the country’s personal information leaked, identity protection services are increasingly valuable.
The company discovered the additional affected consumers as part of its follow-up efforts to assess the scope of the breach. Equifax is one of three major credit bureaus that monitor your financial activity and helps creditors decide whether they should lend you money.
Consumer advocates have long encouraged taking steps to safeguard your online identity in the wake of a breach like this. One common piece of advice is to set up a credit freeze to prevent thieves from taking loans in your name.
Unfortunately, there’s no guarantee if this will be final word on the number of people affected by the Equifax breach, a point CNBC journalist Carl Quintanilla made on Twitter.
3. Yet another reason to avoid Wells Fargo?
The news: More scandals at the country’s third-largest bank by assets: This time, Wells Fargo’s wealth management business is under scrutiny from the Justice Department, according to the Wall Street Journal.
The takeaway: If you bank with Wells Fargo or are considering it, there’s a case for doing some serious due diligence. The above is not the only controversial new news about the bank: The New York Times also reported Thursday that Wells employees allegedly shut down accounts of customers who reported possible fraud — instead of investigating the claim and helping victims track down their money.
The bank’s governance record has notably drawn the ire of the Federal Reserve, the country’s central bank, which recently issued an unusual order preventing Wells Fargo from growing any larger until it improves its record. It will also have to replace four members on its board of directors by the end of 2018. (You can read our guide about to how to change banks here.)
4. The new Fed chair hinted at interest rate hikes — good for savers, bad for borrowers
The takeaway: Powell largely avoided making waves, Politico’s Ben White reported, but his suggestion that the Fed could add a fourth rate hike in 2018 may have helped put an end to a three-day winning streak for stocks, as MarketWatch noted, and stoked concern about further interest rate hikes — which could weigh on investors and borrowers, but help savers.
Few people in the world have as much ability to move markets as the Fed chair, whose raising and lowering of interest rates influences asset prices worldwide. While his performance allayed some fears that Powell’s non-academic background could be a liability in high-pressure situations — like his testimony before Congress — Sen. Elizabeth Warren (D-Mass.) grilled Powell about whether he will maintain his predecessor’s consumer protection policies, particularly in the case of Wells Fargo.
5. Report shows as little as 6% of tax cuts is going to workers
The news: A review of post-tax-cut expenditures by the organization Just Capital suggested only 6% of corporate savings resulting from Republican tax reform are being passed to workers through bonuses or higher wages.
The takeaway: The report adds to concerns that workers will be left behind as the economy continues to heat up.
Despite some promising signals — Bloomberg reported that the Tax Cut and Jobs Act boosted real disposable income by 0.6% in January, the biggest gain since April 2015 — there’s still little sign of sustained wage growth. According to Just Capital’s analysis of 90 companies, only 6% of the savings from the tax cut are going to workers, with the lion’s share going to shareholders.
6. Spotify stock will soon be available to buy: Whether you should is another matter
The news: Spotify has filed documents with the Securities and Exchange Commission to do what’s known as a “direct listing” in order to sell stock shares on the New York Stock Exchange.
The takeaway: Expect a volatile first day of trading: Spotify’s choice to bypass the typical initial public offering process means the market will truly set the price. Should you buy the stock? It depends on how much you can handle risk.
When a company sells its stock for the first time, it typically conducts a formalized process called an “initial price offering,” where the price is set ahead of time by bankers known as underwriters. Those banks then use a “road show” to see if there’s demand for the stock at that price. Spotify isn’t doing that, and if it’s successful, more companies may follow suit, Columbia Business School senior lecturer Donna Hitscherich said in an interview.
“It’s unprecedented for a transaction of this size. If this goes well, you may see more companies doing it,” Hitscherich said. “You’re seeing an evolution in the market in how companies may seek to go public. ... A lot of the traditional things that we’re seeing are being nibbled away at the edges.”
That might not necessarily be a bad thing.
As Mic has previously reported, investing in IPOs tends to be more rewarding for the banks that work on them than retail investors. But until investors see how Spotify’s move plays out, it’s hard to know for sure.
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March 2, 2018, 6:00 p.m. Eastern: This story has been updated.