Trade tensions pound stocks; Dow nosedives by 767 points

NEW YORK >> U.S. stocks plunged to their worst loss of the year Monday and investors around the world scrambled to sell on worries about how much President Donald Trump’s worsening trade war will damage the global economy.

China let its currency, the yuan, drop to its lowest level against the dollar in more than a decade, a move that Trump railed against as “currency manipulation.” It also halted purchases of U.S. farm products. The moves follow Trump’s tweets from last week that threatened tariffs on about $300 billion of Chinese goods, which would extend tariffs across almost all Chinese imports.

The S&P 500 index nosedived 87.31 points, or 3 percent, to 2,844.74, for its worst loss since December, when the market was wrapped in the throes of recession fears.

The Dow Jones industrial average plummeted 767.27, or 2.9 percent, to 25,717.74, and the Nasdaq composite swooned by 278.03, or 3.5 percent, to 7,726.04.

“A 3 percent drop in a day is very significant, and you’re seeing sizeable moves in every major foreign market,” said Rich Weiss, chief investment officer of multiasset strategies at American Century Investments.

But, Weiss added, “I am surprised at the market’s surprise at China’s retaliation. We started a fight, and when the opponent punches back, I’m not sure why we’re surprised.”

A warning light of recession in the bond market also began shin

ing more brightly, which might have added to the selling pressure on stocks.

When short-term Treasury yields are higher than longterm rates, a rule of thumb says a recession could arrive in about a year. The threemonth yield was at 2 percent Monday afternoon, 0.28 percentage points higher than

the 10-year’s yield. A month ago, it was 0.21 points higher.

“The market sell-off is showing that there is a severe lack of confidence that this is going to work out for us economically, at least in the short term,” Weiss said.