Coming into this week, market participants thought the big risk was going to be Federal Reserve Chairman Jerome Powell’s first Monetary Policy Report — or Humphrey Hawkins testimony as it used to be called — in front of Congress. Turns out, that wasn’t all that was to come from Capitol Hill.

Equity Markets — A Roller Coaster of a Week

Monday the markets opened with an enthusiastic risk-on mood. The Nasdaq Composite, Russell 1000 and S&P 500 all closed up more than 1.0%. The Russell 2000, (small cap stocks) continued to lag, gaining just 0.7%.

Then the punchbowl was pulled on Tuesday when new Fed Chair Jerome Powell gave his first testimony in front of Congress. The markets were not pleased. All the major equity indices lost more than 1% on the day.

As the markets digest Powell’s testimony Wednesday morning — something Chris Versace, Tematica’s Chief Investment Officer, and I focused on in this week’s Cocktail Investing Podcast — equities tried to muster some enthusiasm, but couldn’t pull it off. By the close of Wednesday’s trading, the Nasdaq lost -0.8%, Russell 1000 and S&P 500 lost -1.1% and the Russell 2000 fell -1.6%, as small-cap stocks continue to underperform – never a bullish indicator.

Not to be outdone by Powell, the big risk for markets this week arrived on Thursday when President Trump announced that the U.S. will implement import tariffs of 25% on steel and 10% on aluminum.

Did we mention that the seventh round of NAFTA negotiations have been going on this week in Mexico? Timing…

How did U.S. equities respond?

In response to the President’s comments, the Dow Jones Industrial Average, having gained more than 150 points earlier in the day, dropped 577 points closing down 1.7% from the prior day. The S&P 500 dropped briefly below its 100-day moving average, losing 1.3% on the day, the VIX rose over 13% and the S&P 1500 Steel Industry Group gained 3%.In general, Industrial companies fell on the news of tariffs, but those that would benefit, such as United States Steel Corp (X) and Nucor Corp (NUE) gained 5.7% and 3.5% respectively.

We saw something similar with Whirlpool (WHR) shares a few weeks back when the administration slapped tariffs on foreign washing machines. Those whose input costs would increase under these tariffs saw shares take a hit, with Ford Motor Co (F) and General Motors (GM) losing 3% and 4% respectively. Friday morning all the major U.S. indices opened well into the red.

Powell’s Pain

Whenever I feel like life is unfairly kicking the puddin’ out of me, I’m going to remind myself that on Powell’s first day as Fed Chair the Dow Jones Industrial Average was hit with its biggest one-day point drop ever and the VIX had its largest one-day percentage gain in history. After his testimony on Tuesday, the markets again took a dive, which continued into Wednesday. Thursday morning Secretary

Thursday morning Secretary Powell spoke before the Senate Finance Committee and after his prepared remarks, he noted that “We don’t see any strong evidence yet of a decisive move up in wages. We see wages, by a couple of measures, trending up a little bit, but most of them continuing to grow at about two and a half percent. Nothing in that suggests to me that wage inflation is at a point of acceleration.”