Stocks Sink After Trump Raises Tariffs on China: Dow Sours After Positive Morning
Associated Press
4:57 p.m. ET Aug. 1, 2019
Traders works after the opening bell at the New York Stock Exchange (NYSE) on Wall Street, August 1, 2019, in New York City. (Photo: JOHANNES EISELE, AFP/Getty Images)
Stocks dropped sharply Thursday and bond prices spiked after President Donald Trump announced the U.S. will slap a new 10% tariff on some $300 billion worth of goods from China beginning next month.
The news erased a broad rally on Wall Street, sending the Dow Jones Industrial Average from a gain of more than 250 points and fell as much as 278. The S&P 500 had been on pace for its best day in nearly two months.
The escalation in the long-running and costly trade dispute comes only a couple of days after both sides resumed negotiations. In a series of tweets, Trump noted that while the slow-moving trade talks have been “constructive,” China has not followed through on some prior agreements, including the purchase of large quantities of U.S. agricultural products.
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The new tariff would take effect Sept. 1. The U.S. has already applied tariffs of 25% on $250 billion worth of goods from China. Beijing has retaliated with tariffs on $110 billion in American goods, including agricultural products, in a direct shot at Trump supporters in the U.S. farm belt.
Companies that rely heavily on doing business with China took the brunt of the selling. Apple quickly went from a gain of 1.4% to a loss of 2.3%. Electronics retailer Best Buy went from a slight gain to a drop of 9.3% in heavy trading.
Banks, industrials and energy companies also fell. Utilities and real estate stocks rose as traders shifted money into more stable, high-yield stocks. Bond prices spiked as traders sought safety. The yield on the 10-year Treasury dropped to the lowest it’s been since the 2016 election. The price of U.S. crude oil skidded 8%.
The afternoon sell-off puts the market on track to extend its losses for the week. The S&P 500 had its worst day in two months Wednesday after the Federal Reserve’s latest interest rate policy signals disappointed investors.
The S&P 500 index was down 0.9% as of 2:36 p.m. Eastern time. The Dow dropped 251 points, or 0.9%, to 26,612. The Nasdaq composite lost 1%. The Russell 2000 index of small companies slid 1.6%.
Bonds
Prices for U.S. government bond rose sharply, sending yields even lower. The yield on the benchmark 10-year Treasury fell to 1.90%, the first time it’s been below 2% since July 3. That yield, a benchmark used to set interest rates on mortgages and other loans, has been declining steadily since November, when it traded as high as 3.23%.
Meanwhile, the yield on the 2-year Treasury note slid to 1.73% from 1.87% late Wednesday, a very large move.
4:57 p.m. ET Aug. 1, 2019
Traders works after the opening bell at the New York Stock Exchange (NYSE) on Wall Street, August 1, 2019, in New York City. (Photo: JOHANNES EISELE, AFP/Getty Images)
Stocks dropped sharply Thursday and bond prices spiked after President Donald Trump announced the U.S. will slap a new 10% tariff on some $300 billion worth of goods from China beginning next month.
The news erased a broad rally on Wall Street, sending the Dow Jones Industrial Average from a gain of more than 250 points and fell as much as 278. The S&P 500 had been on pace for its best day in nearly two months.
The escalation in the long-running and costly trade dispute comes only a couple of days after both sides resumed negotiations. In a series of tweets, Trump noted that while the slow-moving trade talks have been “constructive,” China has not followed through on some prior agreements, including the purchase of large quantities of U.S. agricultural products.
Retail apocalypse: Flagship stores shutting down
The new tariff would take effect Sept. 1. The U.S. has already applied tariffs of 25% on $250 billion worth of goods from China. Beijing has retaliated with tariffs on $110 billion in American goods, including agricultural products, in a direct shot at Trump supporters in the U.S. farm belt.
Companies that rely heavily on doing business with China took the brunt of the selling. Apple quickly went from a gain of 1.4% to a loss of 2.3%. Electronics retailer Best Buy went from a slight gain to a drop of 9.3% in heavy trading.
Banks, industrials and energy companies also fell. Utilities and real estate stocks rose as traders shifted money into more stable, high-yield stocks. Bond prices spiked as traders sought safety. The yield on the 10-year Treasury dropped to the lowest it’s been since the 2016 election. The price of U.S. crude oil skidded 8%.
The afternoon sell-off puts the market on track to extend its losses for the week. The S&P 500 had its worst day in two months Wednesday after the Federal Reserve’s latest interest rate policy signals disappointed investors.
The S&P 500 index was down 0.9% as of 2:36 p.m. Eastern time. The Dow dropped 251 points, or 0.9%, to 26,612. The Nasdaq composite lost 1%. The Russell 2000 index of small companies slid 1.6%.
Bonds
Prices for U.S. government bond rose sharply, sending yields even lower. The yield on the benchmark 10-year Treasury fell to 1.90%, the first time it’s been below 2% since July 3. That yield, a benchmark used to set interest rates on mortgages and other loans, has been declining steadily since November, when it traded as high as 3.23%.
Meanwhile, the yield on the 2-year Treasury note slid to 1.73% from 1.87% late Wednesday, a very large move.
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