Market Snapshot: Dow Set For 300-point Drop After Cohns Exit

U.S. stock futures were poised to open sharply lower early Wednesday, in a move sparked late Tuesday by the resignation of Gary Cohn, the head of President Donald Trump’s National Economic Council.

Concerns about the prospect of a global trade war, prompted by Trump’s plan to introduce tariffs on steel and aluminum imports, were intensifying, as Cohn had opposed the tariff plan and was widely viewed as having a moderating influence. The European Union, a major U.S. trading partner, is expected to reveal its response Wednesday.

Read more: How a tariff-rattled stock market is reacting to Cohn’s resignation

And see: Trump tariffs may really be a backdoor way to get out of the WTO

What are the main benchmarks doing?

Futures for the major gauges were much lower, but were paring earlier losses logged in the wake of the Cohn news.

Dow Jones Industrial Average futures YMH8, -1.19% were down 323 points, or 1.3%, to 24,530, after being down by more than 400 points. S&P 500 futures ESH8, -0.95% dropped 27.40 points, or 1%, to 2,696.50, while Nasdaq-100 NQH8, -0.84% tumbled 66.75 points, or 1%, to 6,841.

Losses of that magnitude would erase Dow’s year-to-date gain. On Tuesday, the Dow DJIA, +0.04%  , S&P 500 SPX, +0.26% and Nasdaq Composite COMP, +0.56% closed moderately higher.

What is driving markets?

Investors fled assets perceived as more risky after the news of the resignation of Cohn, who had opposed Trump’s tariff plan while serving as National Economic Council director. He is regarded as the chief architect of Wall Street-friendly corporate tax cuts signed into law last year, and he was seen as a level head in an administration that has seen tumult.

His decision to leave the role as the president’s top economic adviser adds to fears that Trump is adopting an increasingly protectionist stance and could spark a global trade war. That type of conflict could threaten the U.S. economic expansion.

Bloomberg News late Tuesday reported that hours before Cohn’s departure, Trump had asked the adviser to publicly endorse a plan to implement tariffs. That adds credence to expectations that the import duties—a 25% tariff on steel and 10% on aluminum—will be levied in coming days.

Investors have been weighing the likelihood of a trade war given the opposition of key Republicans to Trump’s tariff plan.

Check out: Meet Peter Navarro, the man who pushed Gary Cohn out of the White House

And read: Why a full-blown Trump trade war won’t happen

What are strategists saying?

The drop for S&P 500 futures “shows that the market had a lot of trust in [ Cohn’s] 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],” Kinahan said.

What is on the economic docket?

A hefty lineup of releases begins with the ADP employment report for February, due at 8:15 a.m. Eastern Time.

A report on the trade deficit in January is scheduled to arrive 15 minutes later, with a reading of a deeper, $55.2 billion deficit forecast. Also coming at 8:30 a.m. Eastern are fourth-quarter updates on productivity and unit labor costs.

The Beige Book release is expected at 2 p.m. Eastern, and then a reading on consumer credit in January due at 3 p.m.

Check out: MarketWatch’s Economic Calendar

There are two Federal Reserve officials on the speaker list Wednesday. New York Fed President William Dudley is due to talk about the impact of the hurricanes to the Puerto Rico Chamber of Commerce in San Juan at 8 a.m. Eastern. At that same time, Atlanta Fed President Raphael Bostic is scheduled for a fireside chat on economic outlook in Fort Lauderdale, Fla.

Which stocks are in focus?

Shares in H&R Block Inc. HRB, -0.12% may be active after the tax preparer reported late Tuesday a wider-than-expected fiscal-third-quarter 2018 loss but quarterly revenues that came in above expectations.

Urban Outfitters Inc. URBN, +2.07% late Tuesday reported fourth-quarter earnings that took a hit from the new U.S. tax law.

Autodesk Inc. ADSK, +0.84% reported fourth-quarter net losses and revenue late Tuesday that beat expectations.

Ross Stores Inc. ROST, +3.24% beat fourth-quarter sales and earnings expectations in its results, but predicted a slower-than-expected pace of same-store sales growth for the year

Shares in AeroVironment Inc. AVAV, +0.78% could be in focus after the drone maker said late Tuesday that it had swung to a surprise fiscal 2018 third-quarter loss.

How are other markets performing?

European stocks SXXP, -0.48% mostly traded lower, and Asian markets closed with losses.

Gold futures GCJ8, -0.21%  , oil futures CLJ8, -0.65% and the ICE U.S. Dollar Index DXY, +0.10% lost ground.

Barbara Kollmeyer, Victor Reklaitis, Karen Friar, Mark DeCambre and William Watts contributed to this report.

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