Stocks drop 4 percent in rocky week on trade, growth worries
Wall Street capped a turbulent week of trading Friday with the biggest weekly loss since March as traders fret over rising trade tensions between Washington and Beijing and signals of slower economic growth.
The latest wave of selling erased more than 550 points from the Dow Jones Industrial Average, bringing its three-day loss to more than 1,400. For the week, major indexes are down more than 4 percent.
Worries that the testy U.S.-China trade dispute and higher interest rates will slow the economy have made investors uneasy, leading to volatile swings in the market from one day to the next.
On Monday, news that the U.S. and China had agreed to a 90-day truce in their escalating trade conflict drove stocks sharply higher, adding to strong gains the week before. The next day, as doubts mounted over the likelihood of a swift resolution to the trade dispute, stocks sank.
That sell-off extended to Thursday, when U.S. stock markets reopened for trading after a national day of mourning for former President George H.W. Bush. An early plunge knocked 700 points off the Dow as investors worried the arrest of a senior Chinese technology company official would undermine trade negotiations between Washington and Beijing, but stocks bounced nearly all the way back by the end of the day on news that the Federal Reserve was considering a wait-andsee approach to its interest rate hikes.
That optimism fueled a rally early Friday, which faded into another sharp drop.
“We’re in a market where investors just want to sell any upside that they see,” said Lindsey Bell, investment strategist at CFRA. “The volatility we’ve seen the last couple of weeks has been pretty extreme in both directions.”
The S&P 500 index fell 2.3 percent. The index has ended lower three out of the last four weeks. The Dow dropped 2.2 percent. The tech-heavy Nasdaq composite slid 3 percent.
The S&P 500 and Dow are now in the red for the year again. The Nasdaq was holding on to a modest gain.
The current bull market for stocks, which began in March 2009, has shown signs of sputtering this year, with the S&P 500 entering into a correction, or drop of 10 percent from a recent high, twice this year. The index is now down 10.2 percent from its alltime high on Sept. 20.
The market is now on track for its worst year since 2008, when the S&P 500 ended with a 38.5 percent loss.
Volatility has gripped the market since early October, reflecting investors’ worries that the Federal Reserve might raise interest rates too aggressively as it tries to keep inflation in check, potentially slowing economic growth.
“The Fed has taken the punch bowl away in getting back to rates where they are today,” said Doug Cote, chief market strategist for Voya Investment Management. “We’re also going to get back to more normal volatility.”
Traders also fear that a prolonged trade dispute between the U.S. and China could crimp corporate profits and that tariffs will raise costs for businesses and consumers. Uncertainty over those issues helped drive the market’s sell-off this week.
The U.S. has announced tariffs on $250 billion in Chinese imports this year, with the tax rate on many products set to rise Jan. 1, while China put new taxes on $110 billion in U.S. goods.
Last weekend, President Donald Trump and his Chinese counterpart Xi Jinping agreed over dinner at the G-20 summit in Argentina to a temporary, 90-day stand-down in the two nations’ trade conflict to allow time to smooth out a dispute over Chinese technology policies that the U.S. and other trading partners consider predatory.
Trump agreed to hold off on plans to raise tariffs on $200 billion in Chinese goods. In return, Xi agreed to buy a “very substantial amount” of agricultural, energy and industrial products from the U.S. to reduce its large trade deficit with China.
The development, and the boost it gave the market, didn’t last, however. Analysts began to question whether the Trump-Xi talks put both sides any closer to resolving their differences.
The arrest of a senior Chinese technology executive, which was disclosed on Wednesday, also could complicate trade negotiations.
Canadian authorities arrested Meng Wanzhou, chief financial officer at China’s Huawei Technologies, for possible extradition to the U.S. Meng, a prominent member of Chinese society, is suspected of trying to evade U.S. trade curbs on Iran.