Dow tumbles 572 points as trade war fears pummel stocks

Stocks tumbled Friday as trade tensions between the United States and China heated up.The Dow closed down 572 ...

Posted: Apr 7, 2018 12:45 PM
Updated: Apr 7, 2018 12:45 PM

Stocks tumbled Friday as trade tensions between the United States and China heated up.

The Dow closed down 572 points, a drop of 2.3%, after President Trump threatened to escalate a confrontation with China over trade. It fell as much as 767 points earlier in the day. The S&P 500 and the Nasdaq each declined more than 2%.

Friday's losses wiped out gains for the week, and the Dow sank back into correction territory - 10% below its all-time closing high in January.

Trump said late Thursday that he was considering tariffs on $100 billion more in Chinese exports, which would triple what the United States is already planning.

Related: Trump threatens China with new $100 billion tariff plan

"The fear of a policy mistake on trade is increasing," said Art Hogan, chief market strategist at B. Riley FBR.

All 30 companies on the Dow lost ground on Friday. Caterpillar, Boeing and Nike, giants with heavy exposure in China, were among the biggest losers in the index.

"The ratcheting up of trade tensions clearly carries risks. The tariff threats, even if only intended as bargaining tools, will be difficult to back down from if talks fail to deliver results," Capital Economics' Julian Evans-Pritchard wrote in a research note Friday.

Anxiety returned to Wall Street after three days of gains. The VIX, a measure of market volatility, spiked 12%. CNNMoney's Fear and Greed index sank further into "extreme fear" territory.

Wary investors had been holding out hope that the two sides will reach a deal before the proposed trade barriers go into effect.

Related: Trade war? Not so fast. Why stocks are rallying again

White House officials, including top economic adviser Larry Kudlow, have sought in recent days to soothe business leaders' fears of a trade war that would constrain economic growth.

Earlier this week, the Trump administration announced plans for tariffs on $50 billion worth of Chinese goods in retaliation for China's alleged theft of US intellectual property. Beijing fired back hours later by threatening tariffs on $50 billion worth of US goods, including cars, planes and soybeans.

The market had been interpreting Trump's proposed tariffs as negotiating tactics meant to extract concessions out of China rather than a rigid position. But Wall Street began to reassess that view as the administration sent conflicting signals throughout the day.

"We've gone from Larry Kudlow trying to calm the markets down to the administration saying, 'Hey, ignore the markets,'" Hogan said.

In a radio interview Friday morning, Trump said, "I'm not saying there won't be a little pain, but the market has gone up 40%, 42%, so we might lose a little bit of it."

Kudlow, speaking to reporters shortly after the markets opened, said, "Now, we're not running a trade war." He stressed that the US tariffs on China were simply proposals, still to be vetted by trade officials and open to public comment.

Selling accelerated later in the day after Treasury Secretary Steve Mnuchin told CNBC, "There is the potential of a trade war."

Related: Mnuchin says there's 'potential for a trade war' with China

Investors had been operating under the assumption China and the United States were negotiating to avoid a trade conflict, but Mnuchin avoided questions about whether the two countries were actively talking.

"As no one came out to pull this back, there was a gradual realization that this was something that might be a little more serious," said Brad McMillan, chief investment officer for Commonwealth Financial Network.

Analysts said the market also responded to Federal Reserve Chair Jerome Powell, who said that the US economy was growing and a turbulent stock market would not change the Fed's course to gradually raise interest rates.

The Fed is on track to raise rates three times this year, but it could speed up the increases to keep the economy from overheating.

"Markets are forced to confront the idea that rates are going up and the stock market is not going to derail that process," McMillan said.

Related: How much ammo does China have for a trade war?

Stocks were mostly unaffected by the March jobs report, which showed that the US economy added 103,000 positions, down from a much bigger gain in February and well below what analysts were expecting.

Wages grew 2.7% in March compared with a year earlier, in line with expectations. Investors were watching that number because it's a barometer of inflation. In February, an unexpected jump in wage growth set off inflation alarm bells and caused stocks to plunge.

Related: Beyond passwords: Companies use fingerprints and digital behavior to ID employees

The combination of the hiring slowdowns and modest wage growth temporarily eased Wall Street's concerns that the economy was getting too hot.

The yield on the 10-year US Treasury note, which has been steadily climbing as investors' inflation expectations rise, dipped to 2.78% after the jobs report.

"Investors breathed a sigh of relief," said Sam Stovall, chief investment strategist at CFRA Research. "Now we only have one issue to deal with, and that's trade."

-CNNMoney's Paul R. La Monica contributed to this report.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 259117

Reported Deaths: 5668
CountyCasesDeaths
DeSoto17436187
Hinds16524328
Harrison13876199
Rankin11000217
Jackson10652187
Lee8981141
Madison8413168
Jones6552112
Forrest6101121
Lauderdale6034189
Lowndes5463119
Lafayette507393
Lamar496465
Washington4877124
Bolivar4068109
Oktibbeha401681
Panola378380
Pontotoc372155
Monroe3628105
Warren3619101
Union350563
Marshall349569
Neshoba3433152
Pearl River3380104
Leflore3079108
Lincoln300687
Sunflower289272
Hancock285360
Tate276762
Alcorn268854
Pike266580
Itawamba266261
Scott253448
Yazoo250156
Prentiss249552
Tippah245850
Copiah244549
Coahoma243654
Simpson240069
Leake234367
Grenada221171
Marion218473
Covington216972
Adams210170
Wayne206432
Winston205267
George202739
Attala195761
Newton195745
Tishomingo192461
Chickasaw186144
Jasper176038
Holmes169868
Clay162735
Tallahatchie154935
Stone148424
Clarke143562
Calhoun138021
Smith125825
Yalobusha120234
Walthall113437
Greene112129
Noxubee111425
Montgomery110936
Carroll105922
Lawrence104317
Perry103231
Amite99926
Webster94324
Tunica87621
Jefferson Davis87327
Claiborne86825
Benton84023
Humphreys83624
Kemper79120
Quitman7029
Franklin68716
Choctaw62313
Wilkinson58825
Jefferson55920
Sharkey44217
Issaquena1606
Unassigned00

Alabama Coronavirus Cases

Cases: 432536

Reported Deaths: 6379
CountyCasesDeaths
Jefferson63523957
Mobile30967562
Madison27627201
Tuscaloosa21122268
Montgomery19495326
Shelby18941126
Baldwin16798188
Lee12901102
Morgan12447129
Etowah11911178
Calhoun11365205
Marshall10322119
Houston8813156
Limestone823176
Cullman8159106
Elmore8056104
DeKalb7796102
Lauderdale773399
St. Clair7705122
Talladega6347109
Walker5993174
Jackson590341
Colbert543274
Blount541186
Autauga527061
Coffee454160
Dale405482
Franklin371948
Russell345712
Chilton340972
Covington334168
Escambia328344
Dallas310196
Chambers297370
Clarke290536
Tallapoosa2665107
Pike258830
Marion250155
Lawrence249150
Winston231442
Bibb219848
Geneva206946
Marengo205229
Pickens198631
Hale180842
Barbour177836
Fayette174528
Butler171358
Cherokee162530
Henry157523
Monroe150718
Randolph143236
Washington139527
Clay128546
Crenshaw121644
Cleburne119724
Lamar119621
Macon119637
Lowndes112536
Wilcox105822
Bullock101428
Perry99118
Conecuh96320
Sumter89726
Greene76723
Coosa62215
Choctaw51624
Out of AL00
Unassigned00
Tupelo
Clear
37° wxIcon
Hi: 57° Lo: 38°
Feels Like: 30°
Columbus
Clear
38° wxIcon
Hi: 55° Lo: 40°
Feels Like: 33°
Oxford
Clear
34° wxIcon
Hi: 55° Lo: 35°
Feels Like: 28°
Starkville
Partly Cloudy
39° wxIcon
Hi: 54° Lo: 40°
Feels Like: 36°
WTVA Radar
WTVA Temperatures
WTVA Severe Weather