The main Wall Street indexes recorded a significant decline at the end of Friday trading session as investors were worried about US President Donald Trump’s surprising threat of imposing duties on all Mexican imports amid a deepening trade war with China that could send the US economy into recession.
The blue-chip index Dow Jones Industrial Average wiped out 354.84 points and ended the last trading session in May at 24,815.04 points. The broader S&P 500 declined by 1.3% to 2,752.06 points, while the technology benchmark Nasdaq Composite dropped by 1.5% to 7,453.15 points. The S&P 500 ended the month with a decline of 6.6% due to the volatility of the market after the failure of the trade talks with China and the deterioration of rhetoric on both sides.
Friday falls are added to the tense week and month for the US markets. Dow registered a 3% drop this week and a sixth consecutive weekly loss. This is the longest series of weekly dips since 2011. The S&P 500 and Nasdaq saw a fourth consecutive weekly decline. They broke off their four-month series of growths.
The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 8.15% to 18.71.
The carefully monitored yield on 10-year US government bonds reached its lowest level since 2017. On Friday it fell to 2.131%, while at the beginning of the month it was over 2.5%. The yield on 30-year US bonds also fell Friday to 2.572%.
Last night, Trump said the United States would impose a 5% duty on all Mexican imports as of June 10, while illegal immigration across the southern border was not halted. The White House added in a statement that the tariffs would be increased if the immigration problem is not resolved, with duties rising if Mexico does not take “accurate action” to reduce or eliminate the problem.
Mexico is one of the largest trading partners in the United States. America imports chemicals, transport equipment and other commodities from Mexico totaling billions of dollars each year.
The US duties on Mexican imports come against the US’s efforts to reach a trade agreement with China. Washington and Beijing have exchanged tariffs on billions of dollars since the beginning of 2018, shaking the financial markets and worsening the attitudes of businesses and consumers.
The trade war seems to be bad for the Chinese economy. Industrial production in the country shrank more than expected in May. The Industrial Purchasing Managers’ Index (PMI) reached 49.4 points in May from 50.1 points in April.
Corporate stocks performance
The stocks of General Motors (GM) fell by 4.25%, while Ford lost 2.3% of its value. Both car groups have significant production in Mexico, which can be subject to customs duties. The stock prices of the railway companies Kansas City Southern and Union Pacific also dropped by 4.5% and 2%, respectively. Fiat Chrysler finished trading with a 5.8% drop.
The beer manufacturer Constellation Brands wiped out 5.9% of its value.
The stocks of Dow Inc fell to 3-years lows, wiping out 3.53% of its market capitalization.
Exxon Mobil and Chevron each lost more than 1% as oil prices dropped.
Verizon Communications was slammed Thursday after UBS lowered its rating on the stock to “neutral” from “buy”. That now looks like a prescient call because shares of Verizon and rival AT&T were drubbed Friday on reports that Amazon could be looking to enter the wireless telecommunications business.
However, Cooper Companies Inc was among the winners today, with its shares rising to an all-time high, adding 3.96%.
The top performers on the S&P 500 were Cooper Companies Inc (+3.96%), DISH Network Corporation (+3.88%) and Dollar Tree Inc (+3.34%), while on the flipside were Gap Inc (-9.3%), Sysco Corporation (-7.65%) and Mattel Inc (-7.16%).