The Dow tumbled more than 500 points on Tuesday afternoon as trade worries loomed again over the stock market.
Investors, who previously hoped this week’s trade negotiations with China would lead to a resolution, now questioned the progress following unexpected threats from the White House of impending tariff hikes.
“The Trump administration’s doubling down on the China threats has been a gut punch to bulls,” says Daniel Ives, managing director of equity research at Wedbush Securities. “Investors do not want to add risk going into trade talks this week given the shot across the bow from the administration.”
The Dow Jones Industrial Average dropped 505 points, or 1.91%, to 25,934 in afternoon trading, while the Standard & Poor’s 500 fell 53 points, or 1.82%, to 2,879. The tech-heavy Nasdaq plunged 177 points, or 2.18 percent, to 7,947.
In a press conference after the markets closed on Monday, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Mnuchin said that on Friday, the U.S. would increase tariffs on Chinese goods, reiterating threats that President Donald Trump had made over Twitter on Sunday and Monday.
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Lighthizer and Mnuchin said the administration’s about-face comes after the Chinese began retreating on previous trade offers ahead of this week’s talks. The two countries were set to meet on Wednesday to discuss trade, but that has since been delayed until Thursday after Trump’s tariff threat.
“The biggest threat to this market is the U.S.-China trade issues,” Ives says. “If China and the U.S. dig in on trade, it’s time to put on the hard hat because the market could go down another 10% plus.”
The ongoing trade feud has raised costs on goods for consumers and companies.
Every sector fell, extending the market’s losses into a second day. Tech, industrials and ad banks led the decline. 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.
Microsoft fell 2.25% and Intel fell 2.08%. Caterpillar shares lost 2.84%, while 3M shares dropped 2.23%. JPMorgan Chase was down 1.77% and Bank of America fell 2.05% in afternoon trading.
Contributing: The Associated Press