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Trade War Fears Triggered Medtronic’s Stock Decline on March 23

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Medtronic’s recent market performance

Medtronic (MDT) stock traded at its 52-week low of $76.41 on March 23, 2018. The US and most of the global markets registered weakness due to heightened concerns of a trade war between the United States and China. Medtronic stock fell ~2.3% during morning trading and declined ~2.1% during the day.

Peers Becton Dickinson (BDX), Abbott Laboratories (ABT), and Zimmer Biomet Holdings (ZBH) posted declines of ~1.6%, ~2.5%, and ~2.0%, respectively, during the day. On the same day, the Health Care Select Sector SPDR ETF (XLV) fell ~2.2%, and the SPDR S&P 500 ETF (SPY) declined ~2.3%.

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Trade war concerns triggered market volatility

The market decline was triggered by the announcement of President Trump’s plans of imposing $60.0 billion in tariffs on imports from China. This tariff proposal stemmed from Trump’s objection to alleged misappropriations of US intellectual property rights by China.

In a retaliatory move, China proposed to increase tariffs on $3.0 billion in US imports. For a brief discussion of this topic, please read US Indexes Fell Sharply—Is a Trade War with China in the Offing?

Earlier in the week, Trump had announced the administration’s plans to impose tariffs on aluminum and steel imports from China. Aluminum and steel are important raw materials for numerous industries, including medical device manufacturers. Medtronic, which is the largest pure-play medtech player, is expected to see a significant impact of such tariffs on its performance.

However, the markets regained some momentum on March 26, 2018. SPY, DJIA, and XLV rose 2.7%, 2.8%, and 0.93%, respectively, on the day.

MDT stock recovered and gained ~1.3% on March 26, 2018. This rebound was due to the ease in the market’s trade war concerns after Treasury Secretary Steven Mnuchin stated that the two countries are conducting negotiations. Mnuchin noted that he was optimistic that a trade agreement could be negotiated and that a trade war was not the objective of the tariff proposal.

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