Stocks dive on trade war fears after China sanctions

NEW YORK—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 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 American technology, and the Chinese government said it will defend itself. Investors are worried that trade tensions would hurt U.S. companies and harm the world economy. On Thursday they fled stocks and bought bonds, which sent bond prices higher and yields lower. With interest rates falling, banks took some of the worst losses. Technology and industrial companies, basic materials makers and health care companies also fell sharply. The S&P 500 index skidded 68.24 points, or 2.5 percent, to 2,643.69. The Dow Jones industrial average sank 724.42 points, or 2.9 percent, to 23,957.89. The Nasdaq composite gave up 178.61 points, or 2.4 percent, to 7,166.68. The Russell 2000 index of smaller-company stocks lost 35.43 points, or 2.2 percent, to 1,543.87. Construction equipment maker Caterpillar fell $8.90, or 5.7 percent, to $146.90, for its worst loss since mid2016. Aerospace company Boeing slid $17.49, or 5.2 percent, to $319.61. Investors also sold some of the market’s biggest recent winners. Among technology companies, Microsoft fell $2.69, or 2.9 percent, to $89.79 and Alphabet, Google’s parent company, fell $40.85, or 3.7 percent, to $1,053.15. Online retailer Amazon slid $36.94, or 2.3 percent, to $1,544.92. Earlier this month the Trump administration ordered tariffs on imported steel and aluminum, and stocks dropped as investors worried about the possibility of tougher restrictions on international trade and smaller profits for corporations. Their fears eased when the administration said some countries will 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 and Australia. Bond prices climbed, sending yields lower. The yield on the 10-year Treasury note slipped to 2.82 percent from 2.88 percent. Falling bond yields are bad for banks because they force interest rates on loans lower. Bank of America lost $1.32, or 4.1 percent, to $30.55 and JPMorgan Chase gave up $4.79, or 4.2 percent, to $109.95. The decline in rates comes a day after the Federal Reserve raised interest rates and said the U.S. economy and the job market continued to improve over the last two months. The Fed expects to raise rates three times this year, although some investors think a fourth increase is possible. The Fed also said it might raise rates three more times next year instead of two. Benchmark U.S. crude oil shed 87 cents, or 1.3 percent, to $64.30 a barrel in New York. Brent crude, used to price international oils, fell 56 cents, or 0.8 percent, to $68.91 a barrel in London. Wholesale gasoline remained at $2.01 a gallon. Heating oil lost 1 cent to $1.99 a gallon. Natural gas lost 3 cents to $2.62 per 1,000 cubic feet.