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US Stocks Tumble on Trade War 08/23 16:22
The Dow Jones Industrial Average plunged more than 600 points Friday after
the latest escalation in the trade war between the U.S. and China rattled
investors. The broad sell-off sent the S&P 500 to its fourth straight weekly
loss.
(AP) -- The Dow Jones Industrial Average plunged more than 600 points Friday
after the latest escalation in the trade war between the U.S. and China rattled
investors. The broad sell-off sent the S&P 500 to its fourth straight weekly
loss.
Stocks tumbled after President Donald Trump demanded that U.S. companies
with operations in China consider moving them to other countries -- including
the U.S. -- just hours after Beijing announced new tariffs on $75 billion in
U.S. goods.
Trump also announced after the market closed that the U.S. would increase
existing tariffs on $250 billion in Chinese goods to 30% from 25%, and that
tariffs on additional goods expected to kick in on Sept. 1 would be at 15%
instead of 10%. Those announcements are likely to influence stock markets in
Asia when trading opens there Monday.
Friday's developments mark the latest escalation of an ongoing trade dispute
between Washington and Beijing that has threatened the global economy and
weighed on markets. The U.S. has said it would impose 10% duties on the $300
billion of Chinese goods that were not already subject to tariffs in two steps,
On Sept. 1 and Dec. 15. China's retaliatory tariffs set off the barrage of
tweets from Trump that ignited a wave of selling as investors fled stocks in
favor of U.S. government bonds, pushing yields higher. The price of gold also
rose.
"The market is spooked by the escalation in the trade war," said Janet
Johnston, portfolio manager at TrimTabs Asset Management. "Investors are
looking for an endgame and we haven't seen it yet."
The S&P 500 fell 75.84 points, or 2.6%, to 2,847.11. The index is now down
4.5% for the month. It's still up 13.6% for the year.
The Dow lost 623.34 points, or 2.4%, to 25,628.90. The average briefly
dropped 745 points. The Dow has had five declines of 2% or more this year, with
three of them coming this month.
The Nasdaq gave up 239.62 points, or 3%, to 7,751.77. The Russell 2000 index
of smaller company stocks skidded 46.52 points, or 3.1%, to 1,459.49.
Trump also said Friday morning that he was "ordering" UPS, Federal Express
and Amazon to block any deliveries from China of the powerful opioid drug
fentanyl. The stocks of all three companies fell as traders tried to assess the
possible implications.
Matt Arnold, an analyst who covers FedEx and UPS for Edward Jones, said it
could be difficult for the companies to comply should the administration draft
detailed guidelines for rooting out fentanyl.
"There are just too many instances in which the package contents can't be
known or verified," he said. "It's difficult to picture a scenario where UPS
and FedEx are all that well-equipped to detect something like this."
The market opened lower Friday with the news of the new China tariffs. It
recovered a bit after a widely anticipated speech by Jerome Powell where the
chairman of the Federal Reserve indicated the central bank was prepared to cut
interest rates but gave no clear signal on when and by how much.
Speaking at a Fed policy conference in Jackson Hole, Wyoming, Powell noted
that there's growing evidence of a global economic slowdown and suggested that
uncertainty over Trump's trade wars have complicated the central bank's ability
to set interest rate policy. Powell said the Fed "will act as appropriate to
sustain the expansion."
Some economists saw Powell's speech as setting the stage for further
interest rate cuts this year. A quarter-point rate cut reduction in September
is considered all but certain. Some think the Fed will cut rates again in
December.
Technology companies, which have much to lose in the trade battle, bore the
brunt of the sell-off. Apple slid 4.6% and Microsoft gave up 3.2%. Chipmaker
Nvidia dropped 5.3%.
Companies that rely on consumer spending also took losses. Retailer L Brands
plunged 9.3%.
Energy stocks headed lower along with crude oil prices. The price of
benchmark crude sank $1.18, or 2.1% to settle at $54.17 a barrel as traders
worried that the latest escalation in the trade battle could sap global demand
for energy.
U.S. bond prices rose sharply as investors sought safety, sending yields
lower. The yield on the 10-year Treasury fell to 1.53% from 1.61%, a large
move. Banks fell because lower yields can translate to a decline in the
interest rate that lenders charge for mortgages and other consumer loans.
JPMorgan Chase lost 2.5% and Citigroup dropped 3.1%.
The price of gold, another safe haven for investors during times of market
turbulence and economic weakness, rose $29.30 to $1,526.60 per ounce.
In other commodities trading Friday, Brent crude oil, the international
standard, fell 58 cents to close at $59.34 a barrel. Wholesale gasoline fell 3
cents to $1.64 per gallon. Heating oil declined 2 cents to $1.82 per gallon.
Natural gas fell 1 cent to $1.15 per 1,000 cubic feet.
Silver fell 39 cents to $17.40 per ounce and copper fell 2 cents to $2.53
per pound.
The dollar fell to 105.31 Japanese yen from 106.41 yen on Thursday. The euro
strengthened to $1.1145 from $1.1085.
(CZ)
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