How a tariff-rattled stock market is reacting to Cohns resignation from the Trump White House

U.S. stock benchmarks looked set to open sharply lower after Gary Cohn, the head of President Donald Trumps National Economic Council, resigned late Tuesday.

Cohn, a former Goldman Sachs Group Inc.
GS, +1.45%
executive, has been viewed by Wall Street participants as a level head within an administration that has viewed by some critics as one in turmoil.

Cohn is regarded as the chief architect of Wall Street-friendly corporate tax cuts signed into law last year and his decision to leave the role as the presidents top economic adviser underlines a fear that Trump, who last week announced global tariffs on aluminum and steel, is set to soon adopt protectionist stance, which many strategists and traders view as a threat to the economic expansion should they spark a global trade war.

Cohn was increasingly on the outs, according to news reports and viewed as part of a so-called globalist faction in the Trump administration, attempting to moderate efforts to impose protectionist trade policies.

According to The Wall Street Journal, Cohn had lost an intense battle over trade with Peter Navarro, another key presidential adviser seen as an proponent of the tariff plan.

Bloomberg News late Tuesday claimed that Trump requested that Cohn publicly endorse a plan to implement tariffs hours before the adviser announced his departure, further adding credence to expectations that import dutiesa 25% tariff on steel and 10% on aluminumwill be levied in coming days.

Investors had previously fretted over Cohns fate, with stocks temporarily dipping in August on fears he would leave the White House after disagreeing with Trumps remarks in the wake of deadly violence surrounding a white-supremacist rally in Charlottesville, Va.

How market participants responded

Gary Cohn resigning…ugh

— Liz Ann Sonders (@LizAnnSonders) March 6, 2018

Since the Trump administration came into being, Gary Cohn was seen as being supportive for the stock market, and the thought was that if Gary Cohn wasnt in the White House the stock market would collapse, said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange.

Borthwick, however, said he disagrees with that assessment and doesnt think the departure will do lasting damage. Investors will pay attention to who will be chosen to succeed Cohn, but the market doesnt appear to be focused on any individual, he said.

Obviously, S&P 500 futures down shows that the market had a lot of trust in [ Cohns] judgment and he built a lot of credibility on Wall Street over the years, said J.J. Kinahan, chief market strategist at TD Ameritrade. He was viewed as the calmer head that would prevail in the [Trump administration], he said.

Right now, the market is disappointed but one players not going to change the outlook for the economy, I would say the market is overreacting and I would buy the dip, said Doug Cote, chief market strategist at Voya Investment Management.

Sorry to lose him but life goes on, he said.

Chris Zaccarelli, chief investment officer, at Independent Advisor Alliance, said: The initial market reaction should be very negative both because it signals that the Trump administration is absolutely going to move forward with tariffs and the risk of a trade war is now more elevated as well as the loss of a market-savvy and well regarded voice of reason within Trumps inner circle.

Via Twitter late Tuesday, Cohns former boss, Goldman Chief Executive Lloyd Blankfein, said Cohn deserves credit for serving his country in a first class way. Im sure I join many others who are disappointed to see him leave,

Gary Cohn deserves credit for serving his country in a first class way. Im sure I join many others who are disappointed to see him leave.

— Lloyd Blankfein (@lloydblankfein) March 6, 2018
How market benchmarks reacted

Futures on the Dow Jones Industrial Average
YMH8, -1.30%
tumbled 417 points, or 1.7%, near its lows to 24,435, while S&P 500 index futures
ESH8, -0.94%
retreated 38 points, or 1.4%, at 2,686. Nasdaq-100 futures
NQH8, -0.93%
declined by 101.25 points, or 1.5%, to 6,806.75.

If they hold, the declines are set to erase year-to-date gains for the Dow
DJIA, +0.04%
which rose 9.36 points to 24,884.12 in regular trade Tuesday, while the The S&P 500
SPX, +0.26%
climbed 7.18 points, or 0.3%, to 2,728.12. The Nasdaq Composite Index
COMP, +0.56%
meanwhile, gained 41.30 points, or 0.6%, to 7,372.01.

The U.S. dollar, as gauged by the ICE U.S. Dollar Index
DXY, +0.11%
which measures the buck against a half-dozen currencies, initially weakened, falling as much as 0.7% to 89.43, before that weakness moderated somewhat.

The dollar was off versus the Japanese yen
USDJPY, -0.38%
in Asian dealings, falling to 楼105.61 versus around 楼106.15 in late afternoon action in New York.

Related Topics U.S. Stocks Markets NY Stock Exchange NASDAQ

Quote References GS +3.81 +1.45% YMH8 -323.00 -1.30% ESH8 -25.50 -0.94% NQH8 -64.25 -0.93% DJIA +9.36 +0.04% SPX +7.18 +0.26% COMP +41.30 +0.56% DXY +0.10 +0.11% USDJPY -0.40 -0.38% Show all references
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