724-point drop puts Dow back in correction territory
U.S. stocks sold off sharply Thursday, with the Dow tumbling more than
700 points amid growing fears of a trade fight between the U.S. and its trading partners after President Trump said he will impose billions of dollars in tariffs on Chinese imports.
The heavy selling on Wall Street was exacerbated by continued weakness in shares of Facebook as well as concerns about the impact of rising interest rates on the economy.
The Dow Jones industrial average closed down more than 724 points, or nearly 3%, to 23,958. It was the bluechip average’s fifth-worst daily point drop in history and worst point drop since Feb. 8, when it fell more than
1,000 points. After the big fall, the Dow is down 3.1% for the year and 9.99% from its January all-time high, which basically puts it back in correction territory, or a drop of 10%.
The tech-packed Nasdaq slid 2.4% and the broad Standard & Poor’s 500 stock index dropped 2.5%.
Wall Street got confirmation from President Trump that the U.S. is aiming for tariffs on $60 billion of Chinese imports, a move that has increased worries of a global trade war and retaliation from Beijing. Under a memorandum signed at the White House, Trump ordered the U.S. trade representative to develop a list of specific tariffs within 15 days; that list would be subject to a period of public comment before they take effect.
Threat of a trade war topped the list of fears of money managers in a survey released Tuesday by Bank of America Merrill Lynch.
Growing uncertainty as to how the growing friction over trade will ultimately play out — and how bad it will get — is a major market concern.
“The biggest threat is retaliation and where it all ends,” says Craig Erlam, senior market analyst at OANDA, a currency trading firm with offices in New York.
Trade wars are bad for the global economy, as they cause prices consumers and businesses pay for goods and services to rise. A rise in inflationary pressures could prompt the U.S. central bank to speed up its pace of interest rate hikes, which could slow economic growth. Trade skirmishes can also hurt U.S. exports and corporate earnings.
Wall Street was also watching shares of social media giant Facebook closely after CEO Mark Zuckerberg in media interviews focused on the company’s data privacy controversy. He noted Facebook had made mistakes and that he would consider appearing before Congress to address the breach. Facebook shares, which are down more than 14% from their Feb. 1 high, fell 2.7% Thursday.
The market sell-off follows Wednesday’s decision by the Federal Reserve to boost its key interest rate by a quarter percentage point but keep its forecast for three hikes in 2018, not the four Wall Street had feared.