Stocks plunge on fears of trade war

Stocks plunged Thursday after the Trump administration slapped sanctions on goods and investment from China. The Dow Jones industrial average dropped more than 700 points — and into correction territory, down 10% from a recent high — as investors feared that trade tensions between the world's largest economies would escalate.

The planned sanctions include tariffs on $48 billion worth of Chinese imports as well as restrictions on Chinese investments. Trump said he's taking those steps in response to theft of U.S. technology, and the Chinese government said it will defend itself. Investors are worried that trade tensions would hurt U.S. companies and the world economy.

On Thursday they fled stocks and bought bonds, which sent bond prices up and yields down. With interest rates falling, bank stocks took some of the worst losses. Technology and industrial firms, basic materials makers and healthcare companies also fell sharply.

That left the Standard & Poor’s 500 index down 8% from its record high reached Jan. 26. The Dow is down 10% from its record high, also reached Jan. 26. The Nasdaq is down 5.6% from its record high, which it reached just 10 days ago. The S&P 500 and Dow have erased all their gains for the year.

Construction equipment maker Caterpillar retreated 5.7% on Thursday to $146.90, its worst loss since mid-2016. Aerospace company Boeing slid 5.2% to $319.61.

Investors also sold some of the market's biggest recent winners. Among tech firms, Microsoft fell 2.9% to $89.79, and Alphabet slid 3.7% to $1,053.15. Amazon declined 2.3% to $1,544.92.

This month the Trump administration ordered tariffs on imported steel and aluminum, and stocks sank as investors feared the possibility of tougher restrictions on trade and smaller profits for corporations. Their fears eased when the administration said some countries would be exempt from the tariffs. That continued Thursday, as U.S. Trade Representative Robert Lighthizer said the tariffs won't apply to the European Union, Canada, Mexico, Argentina, Brazil or Australia.

Bond yields fell. The yield on the 10-year Treasury note slid to 2.82% from 2.88%. Falling bond yields are bad for banks because they force down interest rates on loans. Bank of America shares slid 4.1% to $30.55.

Utility firms and real estate investment trusts rose. When bond yields decline, investors often bid up those stocks and others that pay big dividends.

AbbVie plunged 12.8% to $98.10 after it reported disappointing results from a study of its cancer therapy Rova-T.

Guess soared 28.3% to $19.91 after the clothing firm issued quarterly results that beat expectations and gave strong annual forecasts.

Benchmark U.S. crude oil fell 87 cents to $64.30 a barrel. Brent crude fell 56 cents to $68.91 a barrel. Wholesale gasoline remained at $2.01 a gallon. Heating oil fell 1 cent to $1.99 a gallon. Natural gas fell 3 cents to $2.62 per 1,000 cubic feet.

Gold edged up $5.90 to $1,327.40 an ounce. Silver fell 3 cents to $16.39 an ounce. Copper fell 4 cents to $3.02 a pound.