Dow, stocks dive off Trump's latest comments on US-China trade war

Paul Davidson, USA TODAY

U.S. stocks tumbled more than 600 points Friday after President Donald Trump vowed to respond to retaliatory tariffs announced by Beijing earlier in the day and ordered American companies to seek “an alternative to China,” sharply escalating a trade war that has roiled markets for months.

Investors had hoped for more talks between the U.S. and China in September after Trump delayed part of the latest round of tariffs on $300 billion in Chinese imports from September 1 to December 15.

“I think markets thought things were moving along,” says Chris Zaccarelli, chief investment officer of Independent Advisor Alliance. “We just learned things are worse…. substantially worse.”

“Now it seems the truce is off,” he added. “Now it’s anybody’s guess whether there will be talks in September.”

The Dow Jones industrial average fell 623 points, or 2.37%, to 25,629. The Standard & Poor's 500 index dropped 76 points, or 2.6%, to close at 2,847. And the tech-heavy Nasdaq slid 240 points, or 3%, to 7,752.

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For months, the market has repeatedly dropped after  Trump threatens tariffs against China, only to recover at least some of the losses as the president postpones the duties, paving the way for negotiations. After Beijing on Friday announced $75 billion in tit-for-tat tariffs on U.S. imports, stocks fell but then recouped the losses after Federal Reserve Chairman Jerome Powell hinted the central bank likely would cut interest rates again next month. He said the Fed “will act as appropriate to sustain the expansion.”

But then Trump said he would respond to the latest China levies Friday afternoon and “hereby ordered (American companies) to immediately start looking for an alternative to China.”

After the market closed, Trump announced that the existing 25% tariffs on $250 billion in Chinese imports would rise to 30% on October 1, and the 10% levy on the remaining $300 billion in Chinese shipments slated to begin Sept 1 would increase to 15%.

His rhetoric and the higher duties seemed to deepen the trade war and prompted analysts to rethink their market forecasts.

Zaccarelli said his firm hasn’t yet revised its year-end target for the S&P 500 of 3,000. But he added in an email, “if trade tensions continue on this path, we probably expected 10-15% lower target, so somewhere between 2550-2700.”

In this Aug. 19, 2019, file photo traders Gregory Rowe, left, and Michael Milano work on the floor of the New York Stock Exchange.

Trump also said Friday morning that he was “ordering” UPS, Federal Express and Amazon to block any deliveries from China of the powerful opioid drug fentanyl. The stocks of all three companies fell as traders tried to assess the possible implications.

Matt Arnold, an analyst who covers FedEx and UPS for Edward Jones, said it could be difficult for the companies to comply should the administration draft detailed guidelines for rooting out fentanyl.

“There are just too many instances in which the package contents can’t be known or verified,” he said. “It’s difficult to picture a scenario where UPS and FedEx are all that well-equipped to detect something like this.”

Technology companies, which have much to lose in the trade battle, bore the brunt of the sell-off. Apple slid 4.6% and Microsoft gave up 3.2%. Chipmaker Nvidia dropped 5.3%.

Companies that rely on consumer spending also took losses. Retailer L Brands plunged 9.3%.

Energy stocks headed lower along with crude oil prices. The price of benchmark crude sank $1.18, or 2.1%, 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 yield on the 10-year Treasury fell to 1.53% from 1.61%, 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% and Citigroup dropped 3.1%.

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 on Thursday. The euro strengthened to $1.1145 from $1.1085.

Contributing: Associated Press

This article originally appeared on USA TODAY: Dow, stocks plunge off US-China trade war remarks from Trump