Stocks extended losses in midday trading on Thursday as jittery investors worried about the outcome of trade talks between the U.S. and China, wondering whether higher tariffs on Chinese goods threatened by President Trump will go into effect on Friday.
It didn’t calm any nerves that the rhetoric between the two countries heated up in the hours ahead of negotiations.
The Dow Jones industrial average fell 367 points, or 1.41%, to 25,600 in midday trading, while the Standard & Poor’s 500 lost 31 points, or 1.08%, to 2,848. The tech-heavy Nasdaq dropped 94 points, or 1.18%, to 7.849.
“Everyone is trying to figure out what will ultimately happen. Will tariffs kick in this evening?” said Chris Cook, president and CEO at Beacon Capital Management. “Markets are begging for good news, any glimmer that things are not blowing up.”
Back and forth on trade
Investors’ fears of escalating trade tensions were reignited on Sunday after Trump tweeted that he would increase duties on $200 billion of Chinese imports to 25% from 10%. Another tweet threatened a 25% tariff on $325 billion of goods that are currently untaxed.
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On Wednesday night, Trump again threatened harsh tariffs if no agreement is brokered during trade negotiations in a rally in Florida. He said China “broke the deal” in trade discussions.
“You see the tariffs we’re doing?” Trump said. “Because they broke the deal. … They broke the deal. So they’re flying in. The vice premier tomorrow is flying in, but they broke the deal. They can’t do that. So they’ll be paying.”
China’s Commerce Ministry followed up on Thursday with a statement saying the country would impose “necessary countermeasures” if higher tariffs that Trump threatened are enacted on Friday. Gao Feng, a ministry spokesman, later said that China has the “determination and ability to defend its own interests.”
The scheduled trade talks, which were previously supposed to resume on Wednesday, are now Thursday and Friday. Traders don’t typically expect any updates when the negotiations are ongoing.
“But things on Twitter from this administration tend to pop up randomly,” Cook said. “People are watching for those messages.”
No sector is safe
Every sector felt the pressure in Thursday trading. Even utilities, which have practically no exposure to trade issues, were pulled down by the market, Cook said.
Tech was the biggest loser, hurt also by Intel’s disappointing three-year forecast. Shares in Intel lost 5.1% to $46.75 a piece in midday trading.
The trade uncertainty weighing on stocks comes after the S&P 500 and the Nasdaq hit fresh highs last week. All three indexes are still up for the year.
Stocks had been on the upswing, thanks to stronger-than-expected earnings, Fed patience on interest rates, low inflation, robust GDP and low unemployment.