S&P, Dow and Nasdaq Slide After China Tariff Threat and Trump Twitter Response
Stocks fell sharply on Wall Street on Friday amid a fresh escalation of trade tensions between China and President Trump, pushing the market to its fourth straight weekly loss.
The S&P 500 dropped more than 2.5 percent, and the Dow Jones industrial average and technology-heavy Nasdaq index experienced similar declines.
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 American imports. Around 11 a.m., Mr. 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, Mr. Trump said that American 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 following the president’s messages, as investors turned their attention away from a speech by Jerome H. Powell, the Federal Reserve chair, and back toward the trade war between the world’s two largest economies.
The trading on Friday was prime example of the crosscurrents that are 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 a heavily anticipated speech at a conference in Jackson Hole, Wyo., Mr. 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 a decade-plus expansion going. Financial market prices suggest that investors are certain the Fed will cut interest rates for a second time this year when it meets next month.
Mr. Powell’s speech did little to change those expectations, and stocks were largely unchanged after he was done. But Mr. Trump’s statements on Twitter drove the market sharply lower again.
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 United States was worsening, tumbled.
In its announcement on Friday, the Chinese government said it would retaliate against the Trump administration’s plans for two batches of tariffs on $300 billion in Chinese imports, on Sept. 1 and Dec. 15, with levies on $75 billion of American imports on the same schedule.
It was the latest volley in a tit-for-tat battle that has shown growing signs of hurting the global economy. There is mounting evidence that the global industrial sector in particular is weakening. Germany, the Europe’s trade-sensitive economic engine, contracted in the second quarter. And growth in industrial production in China has fallen to its lowest level since 2002.
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 on Friday, with the yield on the 10-year Treasury note plunging to 1.51 percent shortly before 2 p.m. The collapse in long-term Treasury bond yields this year has pushed them below yields on shorter-term debt, an unusual situation known as an inversion of the yield curve.
Yield curve inversions are considered one of the most reliable leading indicators that an economic downturn is coming. Every recession in United States in the past 60 years has been preceded by an inversion, with the economy typically falling into recession 18 to 24 months later.