Trade war’s losers could include microchips, energy, banks

NEW YORK » Looking across the stock market, it’s hard to find a company that isn’t vulnerable in some degree to the U.S.-China trade war.

Stocks of companies that do lots of business with China, such as chipmakers and other technology companies, are obvious candidates for investors to sell when trade worries rise. They have fallen more than the rest of the market whenever President Donald Trump sends out a tweet or speaks about tariffs.

But investors are also looking beyond these first-order effects as they pick out which stocks look susceptible to the trade war. Those picks now include many companies that have no significant ties to China but are still at risk.

That’s why all but 2% of the stocks in the S&P 500 fell on Aug. 5, when worries ratcheted higher after China let its currency devalue to its lowest level in a decade.

The damage has been widespread since Trump shocked investors on Aug. 1 by saying he planned soon to extend tariffs across virtually all Chinese imports.

The latest tariffs cover about $300 million of Chinese goods, many of them consumer products that were exempt from early rounds of taxes. Even though Trump has delayed some of the tariffs, they will ultimately raise costs for U.S. companies bringing goods in from China. Those companies will then have to either pass higher prices on to their customers or give up some of their profits. That’s a big deal for investors because a stock’s price tends to track the path of its earnings over the long term.

One concern is that all the uncertainty on trade will lead businesses and shoppers to hold off on spending in hopes of waiting out the tumult. Businesses say they have seen inklings of such behavior, which, if it accelerates, could lead to a self-fulfilling cycle where weaker sales for companies push them to cut back on hiring. That could lead in turn to even weaker spending and do more damage to the economy. That’s trouble for most companies, to some degree.

It’s also why some of the hardest-hit stocks in recent weeks have little business, if any, in China but remain vulnerable to the consequences of the trade war. Among the losers in the dispute:

ENERGY COMPANIES

Energy stocks in the S&P 500 have plunged 10.2% since just before Trump sent his Aug. 1 tweet, the worst decline of the 11 sectors that make up the index.

National Oilwell Varco, for example, is based in Houston and gets most of its revenue from supplying drilling and other technologies in the United States, Saudi Arabia, Brazil and Norway. But its stock has plunged nearly 22%, seven times the loss of the overall S&P 500.

That’s in large part because the price of oil has sunk on worries that the trade war will do lasting damage to the global economy. If that happens, countries around the world will have less need to burn oil. The price of benchmark U.S. crude plunged nearly 8% on Aug. 1, its worst day in 4½ years.

BANKS

Financial stocks have been the second-worst performing sector in the S&P 500 in recent weeks as the prospect of lessprofitable lending threatens banks’ profits.

Comerica, for instance, has been sucked into an industrywide downdraft. It is based in Dallas and has bank branches mostly in Arizona, California, Florida, Texas and Michigan. It has some businesses operating outside the country, but in Canada and Mexico, not China. Its stock has sunk 16.2% during the recent pick-up in trade tensions.