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Dow Jones declined by over 470 points in the worst trading session since early January

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Wall Street markets suffered a sharp downturn on Tuesday amid mounting fears of escalating US-China trade tensions, despite hopes of some traders that US President Donald Trump’s threat to increase tariffs on Chinese imports is just a negotiating tactic.

The blue-chip index Dow Jones Industrial Average wiped out over 470 points, or 1.8%, reaching a level of 25,965.09 points, while during the day was down by 648.77 points. The decline was the largest since January 3. In turn, the broader S&P 500 fell by 1.65% to a level of 2,884.05 points, while the technology index Nasdaq Composite declined by nearly 2% to 7,963.76.

Dow Jones

Major U.S. stock indexes fell sharply for a second straight day. The collapse of Wall Street comes after the US Trade Representative Robert Lighthizer has confirmed earlier Friday that the US has raised customs duties on Chinese imports with annual turnover 200 billion USD from 10% to 25% and new tariffs are being prepared soon.

Markets were initially encouraged after it was confirmed that the Chinese delegation would still arrive in Washington to continue the dialogue. However, these hopes were broken by the sales representative’s statement.

Trade restrictions are having “adverse effects on confidence and investment plans around the world”, according to an analysis of the Organization of Economic Cooperation and Development (OECD), pointing that the trade growth for 2018 slumped to 4% from 5.25% in 2017.

“Global growth is projected to ease further to 3.3% in 2019 and 3.4% in 2020, with downside risks continuing to build”, concluded the OECD in a recent report. “High policy uncertainty, ongoing trade tensions, and further erosion of business and consumer confidence are contributing to a global slowdown”, adds the report.

Meanwhile, the consumer credit growth in the US weakened in March, reaching its lowest level in nine months. Thus, in the third month of the year, the Americans were less motivated to spend, despite the strong labor market. Total consumer credit grew by 10.3 billion USD from the previous period, unable to meet the expectations of the economists. At the same time, the February figures were revised upwards by 15.5 billion USD, according to Federal Reserve data.

The revolving debt declined for the second time in the last four months until the non-revolving player rises.

Credit growth, albeit unexpectedly weak, still suggests for optimistic consumer sentiment. The healthy labor market developments, as well as steady wage growth, will likely help households to maintain their spending levels in the coming months, despite the weaker start of 2019.

Corporate stocks performance

The stock of all Dow Jones companies ended the trading session into the red, as well as all 11 sectors of the S&P 500.

The shares of companies considered international trade indicators, such as Caterpillar and Boeing fell 2.26% and 3.87% respectively. The aircraft manufacturer’s stock price fell below the 200-day moving average for the first time since January.

The best performers of the session on the Dow Jones Industrial Average were Chevron Corp (-0.11%), McDonald’s Corporation (-0.43%) and Verizon Communications Inc (-0.49%), while the worst performers were Boeing (-3.87%), United Technologies Corporation (-3.4%) and Apple Inc (-2.7%).

Shares of Anadarko Petroleum were in focus Tuesday, after the company said Monday evening that a 38 million USD bid by Occidental Petroleum Corp was superior to a previously accepted by Chevron Corp. Stifel Nicolaus, downgraded Anadarko to “Hold” from “Buy”.

The stocks of Allergan fell by 4.9%, even after the pharmaceutical company reported first-quarter earnings that surpassed Wall Street expectations.

The shares of Mylan NV fell more than 23% on Tuesday, after the drugmaker reported a revenue shortfall that offset a profit beat.

American International Group added 6.8%, after the company reported better-than-expected adjusted earnings on Monday evening.

The electric car manufacturer Tesla Inc was in the focus after the company announced late Monday that Chief Executive Elon Musk spent 25 million USD to buy more shares in the electric car maker, to increase his stake in the company to nearly 20%. The stocks of the company fell by 3.24% during the trading session.

Crocs Inc stock fell by 4.9% after the footwear manufacturer reported first-quarter earnings and revenue that beat expectations.

Corporate earnings reports

Brazilian state-run oil firm Petroleo Brasileiro SA posted quarterly results that missed expectations on Tuesday, although management flagged a potential production boost in the second quarter as new platforms ramp up output. Petrobras, as the firm is known, posted a quarterly profit of 4.03 billion reais (1.02 billion USD), down 42% from the same period a year ago. That was well below the estimate of the analysts for 5.36 billion reais. When adjusted for those one-off items – including 1.3 billion reais in judicial contingencies due to an ongoing dispute with a bankrupt rig lessor – Petrobras said it would have reported a quarterly profit of 5.1 billion reais.

German consumer goods company Henkel reported a disappointing first quarter of earnings and sales on Tuesday as falling industrial production hit its adhesives business and its beauty unit underperformed in western Europe and China. The company saw sales rise by an organic 0.7% to 4.97 billion EUR (5.57 billion USD), while earnings per share dropped 6% to 1.34 EUR, both shy of average analyst forecasts.