Wors­en­ing U.S.-China trade ten­sions rat­tle fi­nan­cial mar­kets

The News-Times - - BUSINESS -

The Dow Jones Industrial Av­er­age tum­bled more than 470 points Tues­day amid a broad sell-off on Wall Street as the U.S. and China moved closer to an es­ca­la­tion of their al­ready costly trade war.

The U.S. was set to impose higher tar­iffs on China on Fri­day, a day after rep­re­sen­ta­tives from both na­tions are sched­uled to re­sume trade talks in Wash­ing­ton. Trump ad­min­is­tra­tion of­fi­cials ac­cused China of reneg­ing on com­mit­ments made dur­ing weeks of ne­go­ti­a­tions.

Both sides had sig­naled progress was be­ing made to­ward a res­o­lu­tion in re­cent weeks. Buoyed by those signs, as well as a more dovish stance on in­ter­est rates by the Fed­eral Re­serve, in­vestors had fu­ri­ously bought stocks and pushed the S&P 500 and Nas­daq to all-time highs last week. All ma­jor in­dexes still have dou­ble-digit gains for the year.

An­a­lysts said the mar­ket was vul­ner­a­ble to any re­ver­sals in the trade talks. This week in­vestors have dumped shares of com­pa­nies that bring in sig­nif­i­cant rev­enue from China, such as those in the tech­nol­ogy and industrial sec­tors. Banks have also taken heavy losses.

“This is a game of poker and the U.S. is play­ing their hand,” said Doug Cote, chief mar­ket strate­gist at Voya In­vest­ment Man­age­ment. “Let’s say the worst hap­pens and they raise tar­iffs on Fri­day, well you’re go­ing to get an­other buy­ing op­por­tu­nity.”

Ev­ery sec­tor fell. Tech­nol­ogy com­pa­nies, which tend to do a lot of busi­ness with China and would suf­fer greatly in a pro­tracted trade war, led the de­cline. Ap­ple fell 2.7 per­cent.

Util­i­ties, nor­mally safe-play hold­ings for in­vestors, fared bet­ter than the rest of the mar­ket. Bond prices also rose as in­vestors sought out other ways to re­duce risk.

The S&P 500 in­dex slumped

48.42 points, or 1.7 per­cent, to

2,884.05. The Dow lost 473.39 points, or 1.8 per­cent, to 25,965.09. The in­dex had been down 648. The Nas­daq com­pos­ite, which is heav­ily weighted with tech­nol­ogy stocks, fell 159.53 points, or 2 per­cent, to 7,963.76.

The Rus­sell 2000 in­dex of small com­pany stocks gave up 32.66 points, or 2 per­cent, to $1,582.31. Ma­jor in­dexes in Europe also fin­ished lower.

The rout is the first big jolt for stocks since the turn of the year, when fear be­gan drain­ing out of the mar­ket and the S&P 500 started its march back to record heights.

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