Wall Street indexes fell sharply on Monday, with the S&P 500 and Nasdaq Composite recording their worst day of the year. This happened after China decided to raise tariffs for some US goods, additionally raising the trade tension between the two countries.
The blue-chip index Dow Jones wiped out 617.38 points, or 2.38%, at its worst session since January 3, 2016. The broader S&P 500 and technology Nasdaq Composite declined by 2.43% and 3.41%, respectively.
Beijing will raise duties on US important worth 60 billion USD on June 1. This decision was taken in response to the introduction of higher duties on Chinese imports at the end of last week. China said the US decision threatens the interests of both sides and does not meet the global expectations of the international community.
The US Treasury Secretary Steven Mnuchin commented that the two countries are still in talks.
However, the tariff hikes and uncertainty about trade carry high volatility on the markets. The Cboe Volatility Index, which is considered to be the best indicator of stock market fear, rose by 4.9 points to 20.94. According to experts, the panic many push investors buying bonds and lower yields.
The yields on 10-year US Treasuries declined to 2.39%, while 2-year bonds fell to 2.17%.
The US stocks fell sharply last week after Donald Trump threatened to increase duties on Chinese imports. Trump plunged his threat by raising 10% to 25% of Chinese goods worth 200 billion USD. The S&P 500 and Nasdaq Composite recorded declines of 2.2% and 3% respectively last week in their worst weekly performance since December. Dow Jones sent its worst week since March, losing 2.1%. Overall, the market has lost about 1.2 trillion USD.
The Dow is down about 1,200 points since President Donald Trump announced tariff hikes last week, with heavier losses in companies with business in China.
The turnabout for markets come just after those major indexes booked their best April gains in about 10 years. However, that precipitous climb for stocks to start the year may have made them more vulnerable to a slump as international trade problems intensify.
Despite the trade tensions, White House Economic Adviser Larry Kudlow said that President Donald Trump and Chinese leader Xi Jinping are likely to meet at the upcoming G20 summit in Japan. Larry Kudlow said the chances of such a meeting “are pretty good”, but there are no “certain plans” on when the US and Chinese negotiators will meet again.
Corporate stocks performance
The stocks of Caterpillar fell by 4.3%, while Apple wiped out 5.1% of its market capitalization. Boeing registered a decline in the price of its stocks by more than 4%. Microsoft Corp lost 23.9 billion USD in market cap shaved off as the stock slid 2.5%.
Intel and Apple have both dropped more than 10% in the six trading days since the president’s tweet on May 5, when he said that levies on 200 billion USD of imported goods from China would climb to 25% from 10%. Caterpillar is down more than 8% since.
Caterpillar, 3M, and Goldman Sachs fell into bear market territory on Monday.
The best performer within Dow Jones was Procter & Gamble Company, which rose by 0.09% on Monday and was the only company that ended into the green on Monday.
Falling stocks outnumbered advancing ones on the New York Stock Exchange by 2,517 to 507 and 67 ended unchanged. On the Nasdaq Stock Exchange, 2,269 fell and 415 advanced, while 46 ended unchanged.
The top performers on the S&P 500 were Newmont Goldcorp Corp (+2.52%), American Water Works (+2.24%) and HCP Inc (+2.04%), while on the flipside were Signet Jewelers Ltd (+11.89%), Mylan NV (-9.43%) and Chesapeake Energy Corporation (-8.05%).