Stocks drop as U.s.-china trade war intensifies

NEW YORK — U.S. stocks plunged to their worst loss of the year Monday and investors around the world scrambled to sell on worries about how much President Donald Trump’s worsening trade war will damage the global economy.

China let its currency, the yuan, drop to its lowest level against the dollar in more than a decade. It also halted purchases of U.S. farm products. The moves follow Trump’s tweets from last week that threatened tariffs on about $300 billion of Chinese goods, which would extend tariffs across almost all Chinese imports.

The escalating dispute between the world’s largest economies is rattling investors unnerved about a global economy that was already slowing, as well as falling U.S. corporate profits.

The S&P 500 dropped 87.31 points, or 3 percent, to 2,844.74 for its worst loss since December, when the market was wrapped in the throes of recession fears. It was down as much as 3.7 percent in the afternoon.

The Dow Jones Industrial Average lost 767.27,

or 2.9 percent, to 25,717.74, and the Nasdaq composite fell 278.03, or 3.5 percent, to 7,726.04.

3 percent drop

“A 3 percent drop in a day is very significant, and you’re seeing sizable moves in every major foreign market,” said Rich Weiss, chief investment officer of multi-asset strategies at American Century Investments.

“I am surprised at the market’s surprise at China’s retaliation,” he said. “We started a fight, and when the opponent punches back, I’m not sure why we’re surprised.”

The sell-off began Monday in

Asia, where indexes lost more than 1 percent, and intensified as it swept westward through Europe to the Americas. Investors in search of safety herded into U.S. government bonds, which sent yields plunging.

The yield on the 10-year Treasury note, which rises with expectations of stronger economic growth and inflation, fell to its lowest level since Trump’s 2016 election energized markets, down to 1.72 percent from 1.85 percent late Friday. The yield on the two-year note, which is more influenced by interest-rate moves from the Federal Reserve, sank to 1.58 percent from 1.71 percent. Both are unusually large moves.

A warning light of recession in the bond market also began shining more brightly, which traders said may have added to the selling pressure on stocks. When shortterm Treasury yields are higher than long-term rates, a rule of thumb says a recession may arrive in about a year. The three-month yield was at 2 percent Monday afternoon, 0.28