Stocks tumbled on Wall Street after President Donald Trump said he hereby ordered U.S. companies to consider alternatives to doing business in China. He also said he would respond to Beijings latest tariff increase later Friday.
The Dow Jones Industrial Average sank nearly 500 points after the president made the announcements on Twitter.
Trump also said he was ordering UPS, Federal Express and Amazon to block any deliveries from China of the powerful opiod drug fentanyl. The stocks of all three companies fell as traders tried to understand what the implications for them were.
The developments mark the latest escalation of an ongoing trade dispute. The U.S. has said it would impose 10% duties on the $300 billion of Chinese goods that were not already subject to tariffs in two steps, On Sept. 1 and Dec. 15. Early Friday China said it would retaliate with taxes on $75 billion of U.S. products along the same timeframe.
The market opened lower with the news of the new tariffs. It recovered a bit after a widely anticipated speech by Jerome Powell where the chairman of the Federal Reserve gave no clear signal on when the central bank may cut interest rates again after a small cut last month.
Speaking at a Fed policy conference in Jackson Hole, Wyoming, Powell noted that theres growing evidence of a global economic slowdown and suggested that uncertainty over Trumps trade wars have complicated the central banks ability to set interest rate policy. Powell said the Fed will act as appropriate to sustain the expansion.
Some economists saw Powells speech as setting the stage for further interest rate cuts this year. A quarter-point rate cut reduction in September is considered all but certain. Some think the Fed will cut rates again in December.
Markets have been jumpy for weeks as traders increasingly worry about a protracted trade war and whether it could tip the already fragile global economy into recession.
Theres been reason to be concerned that this might not get resolved anytime soon, but the market is accepting that not only is it not likely, its very unlikely, said Randy Frederick, vice president of trading and derivatives at Charles Schwab.
The S&P 500 was down 2.1% as of 1:44 p.m. Eastern Time. The Dow Jones Industrial Average lost 499 points, or 1.9%, to 25,756. The average was briefly down 549 points. The Nasdaq dropped 2.6%.
The wave of selling knocked the stock indexes into the red for the week.
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 3.1%. Chipmaker Nvidia dropped 4.8%.
Companies that rely on consumer spending also took losses. Retailer L Brands plunged 8.5%.
Energy stocks headed lower along with crude oil prices. The price of crude sank 3.2% to $53.59 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 1.51% from 1.61%, a large move. Banks fell as lower yields can translate to a decline in the interest rate that lenders charge for mortgages and other consumer loans. JPMorgan Chase fell 2.4% and Citigroup slid 2.6%.
The price of gold, another safehaven for investors during times of market turbulence and economic weakness, rose 1.9% to $1,537.60 an ounce.
