Stocks fall as trade war heats up
Trump slams China, which had promised to act on latest U.S. tariffs
Stocks fell sharply on Wall Street on Friday amid a fresh escalation of trade tensions between China and President Donald Trump, pushing the market to its fourth straight weekly loss.
The S&P 500 fell 75.84 points, or 2.6 percent, to 2,847.11. The index is down 4.5 percent for the month, but it’s still up 13.6 percent for the year.
The Dow lost 623.34 points, or 2.4 percent, to close at 25,628.90. The average briefly dropped 745 points. The Dow has had five declines of 2 percent or more this year, with three of them coming this month.
The Nasdaq gave up 239.62 points, or 3 percent, to close at 7,751.77. The Russell 2000 index of smaller company stocks skidded 46.52 points, or 3.1 percent,
to 1,459.49.
Investors were on edge even before trading started after China vowed to answer the Trump administration’s next round of tariffs on Chinese goods by increasing tariffs on U.S. imports. Around 11 a.m., Trump fired back with a series of messages on Twitter.
“We don’t need China and, frankly, would be far better off without them,” he wrote, adding that he would respond to China’s tariff threat later in the day.
In another Twitter message, Trump said U.S. companies were “hereby ordered to immediately start
looking for an alternative to China.”
Stocks, which had found their footing and begun to move higher, promptly fell after the president’s messages, as investors turned their attention away from a speech by Jerome Powell, the Federal Reserve chairman, and back toward the trade war between the world’s two largest economies.
The trading Friday was a prime example of the crosscurrents confounding investors. Throughout the year, stocks have tumbled on concerns about the continuing trade fight, only to be lifted by hopes that interest rate cuts from the Fed could contain the damage caused by the conflict. More tariffs threats between
Beijing or Washington then start the cycle again.
In an eagerly awaited speech at a conference in Jackson Hole, Wyo., Powell noted that rising uncertainty over the Trump administration’s trade policy was a challenge for the central bank.
But he reiterated that the Fed would act as needed to keep an expansion that’s lasted more than a decade going. Financial market prices suggest that investors are certain that the Fed will cut interest rates for a second time this year when it meets next month.
Powell’s speech did little to change those expectations, and stocks were largely unchanged after he was done. But Trump’s
statements on Twitter drove the market sharply lower again.
Concerns about economic growth have touched off a global rush of money into the safety of bond markets. That has pushed bond prices up, while driving yields sharply lower. Such drops suggest that investors are lowering their expectations for economic growth and inflation.
The trend continued Friday, with the yield on the 10-year Treasury note plunging to 1.53 percent from 1.61 percent, a large move. Banks fell because lower yields can translate to a decline in the interest rate that lenders charge for mortgages and other consumer loans. JPMorgan
Chase lost 2.5 percent, and Citigroup dropped 3.1 percent.
Energy stocks experienced some the steepest losses in the S&P 500, as crude oil prices dropped. Technology stocks and shares in semiconductor companies, both of which have been especially sensitive to signs that the trade fight between China and the U.S. was worsening, tumbled.
The price of benchmark crude sank $1.18, or 2.1 percent to settle at $54.17 a barrel as traders worried that the latest escalation in the trade battle could sap global demand for energy.
U.S. bond prices rose sharply as investors sought safety, sending yields lower.
The price of gold, another safe haven for investors during times of market turbulence and economic weakness, rose $29.30 to $1,526.60 per ounce.
In other commodities trading Friday, Brent crude oil, the international standard, fell 58 cents to close at $59.34 a barrel. Wholesale gasoline fell 3 cents to $1.64 per gallon. Heating oil declined 2 cents to $1.82 per gallon. Natural gas fell 1 cent to $1.15 per 1,000 cubic feet.
Silver fell 39 cents to $17.40 per ounce, and copper fell 2 cents to $2.53 per pound.
The dollar fell to 105.31 Japanese yen from 106.41 yen Thursday. The euro strengthened to $1.1145 from $1.1085.