Investors today digested the Federal Reserve’s interest rate hike and decided it was palatable. The main U.S. stock indices rose today, bouncing back from yesterday’s rate-induced sell-off.

The Senate’s hearings on Supreme Court nominee Brett Kavanaugh made for riveting television and slightly slowed trading volume but overall meant little to Wall Street.

Technology stocks led gainers today, as Wall Street refocused on cash-rich companies that benefit from tax cuts. Apple (NSDQ: AAPL) and Amazon (NSDQ: AMZN) jumped 2.06% and 1.93%, respectively. Economic growth, tax cut windfalls, and strong corporate earnings superseded fears about rising rates.

The news was less sanguine overseas.

For global investors, the 24-7 news cycle generates dire headlines with dizzying frequency. North Korea and nukes? Britain and Brexit? Turkey and the lira? As we used to say in the newspaper business, those stories are “fish wrap.”

Meet the geopolitical crisis du jour: Italy.

European stocks tumbled Thursday on reports that the fiscal mess in Italy is no closer to resolution.

This sun-splashed Mediterranean country is rightfully proud of its rich culture and sense of style. But Italy also happens to be an economic basket case that threatens to drag down the entire European Union.

Italy’s coalition government announced Thursday that it would delay releasing its long-awaited budget, which has been stalled due to political gridlock.

Italy is the third-largest national economy in the euro zone and the eighth-largest in the world. The country is the second-largest manufacturer in Europe behind Germany. But Italy also is beset by a shaky banking sector, massive government and corporate debt, and a fractious government.

Italy’s woes come on top of the global trade war, which gets worse with each passing day.

I’ve repeatedly warned you that President Trump has no desire to end trade tensions during his tenure. U.S. tariffs against China are proliferating, as the chart shows:

Source: International Monetary Fund

China has struck back with its own retaliatory tariffs. Neither side is likely to blink.

Trump has threatened to slap tariffs on nearly all Chinese goods if China does not make concessions. Key among his demands is that Beijing end its practice of mandating the transfer of U.S. proprietary technologies to “partner” companies based in China.

Once in place, tariffs aren’t easy to remove. Supply chains adapt to the levies, as they become an entrenched part of doing business.

Can this marriage be saved?

Trade tensions even extend to the Great White North. The U.S. and Canada this week are rushing to meet an October 1 deadline to forge a new North American Free Trade Agreement (NAFTA) among the U.S., Mexico and Canada.

Trump yesterday claimed that he rejected a one-on-one meeting with Canadian Prime Minister Justin Trudeau over efforts to revamp NAFTA. Canada responded by saying it never asked for a meeting.

The two world leaders have become ardent foes, which is odd because Canada is a long-time ally, as well as a peaceful, prosperous and tolerant democracy. Today, Trudeau vowed that Canada wouldn’t back down.

NAFTA covers more than $1.2 trillion in annual trade among the three countries. The U.S. is Canada’s number one trading partner, purchasing nearly $454 billion worth of goods every year from the country.

But the U.S. and Canada remain at loggerheads, with the White House insisting that Canada reduce its protections on an array of goods, especially dairy products. This year, Trump slapped tariffs on steel and aluminum imports from Canada, in an attempt to bring our northern neighbor to heel.

Mexico already has agreed to a deal to replace NAFTA. Trump has threatened to move forward with Mexico and leave Canada out.

Arrivederci, baby…

The Trump administration has set in motion protectionist trade policies that could damage the global economy for years to come.

Manufacturers are feeling the pain. James Hackett, CEO of Ford Motor (NYSE: F), said yesterday that Trump’s steel and aluminum tariffs have cost the carmaker about $1 billion in profits.

The World Trade Organization (WTO) reported today that world trade growth probably will be slower than previously thought in 2018 and 2019, citing trade conflict as the culprit.

The WTO projects that world trade in goods would grow by 3.9% this year, down from the 4.4% it projected in April. Trade growth of 3.7% is forecast for 2019, less than the WTO’s previous forecast of 4.0%.

In addition, the U.S. Commerce Department reported today that orders for non-defense capital goods, a bellwether for business spending plans, dropped 0.5% last month, after four straight months of robust gains. Economists blamed tariffs.

The post-World War II rules-based international order faces its greatest test. Under the combined strains of rising interest rates, trade war, and crises such as the one in Italy, the bull market could soon say arrivederci.

Thursday Market Wrap

• DJIA: 26,439.93 +54.65 (0.21%)
  
• S&P 500: 2,914.00 +8.03 (0.28%)
  
• Nasdaq: 8,041.97 +51.60 (0.65%)
  

Thursday’s Big Gainers

• Ra Medical Systems (NYSE: RMED) +25.88%

Medical device maker launches IPO.

• Cameco (NYSE: CCJ) +15.41%

Tax court rules in uranium miner’s favor.

• DHI Group (NYSE: DHX) +5.00%

Personnel management firm hires chief product officer.

Thursday’s Big Decliners

• Geron (NSDQ: GERN) -62.92%

Biotech loses Johnson & Johnson (NYSE: JNJ) as partner.

• Bed, Bath & Beyond (NSDQ: BBBY) -21.00%

Homeware retailer slashes sales forecast due to China tariffs.

• ChemoCentryx (NSDQ: CCXI) -18.04%

Biotech announces public offering of common stock.

Letters to the Editor

“Anti-smoking laws are getting more stringent. Should I avoid tobacco stocks?” — Daniel G.

If you don’t harbor moral qualms about “sin” stocks, tobacco firms that are diversifying into booming areas, such as electronic cigarettes and marijuana, still offer growth potential.

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John Persinos is the managing editor of Investing Daily.