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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.

Confirmed Cases: 113876

Reported Deaths: 3238
CountyConfirmedDeaths
Hinds7850176
DeSoto685779
Harrison505083
Jackson445084
Rankin388186
Madison377993
Lee350779
Forrest299578
Jones287784
Washington255199
Lafayette245943
Lauderdale2418134
Lamar221238
Bolivar200177
Oktibbeha199354
Neshoba1831111
Lowndes176362
Panola169038
Leflore165187
Sunflower159749
Warren153655
Monroe147372
Pontotoc145819
Marshall139227
Lincoln138557
Pike137756
Copiah136236
Coahoma124736
Scott124729
Grenada121138
Yazoo120733
Simpson120449
Union116525
Tate114939
Leake114340
Holmes114160
Pearl River112259
Itawamba112125
Adams106743
Prentiss103719
Wayne99821
Alcorn98112
George97718
Covington95326
Marion93542
Tippah88121
Newton85227
Chickasaw83626
Tallahatchie83025
Winston82821
Tishomingo80041
Hancock79827
Attala78926
Clarke73450
Clay68321
Jasper67717
Walthall63627
Calhoun61912
Noxubee59617
Smith58916
Montgomery53523
Claiborne53316
Tunica52817
Yalobusha51914
Lawrence50714
Perry48623
Carroll47612
Greene46918
Stone46214
Humphreys42616
Amite42113
Quitman4196
Jefferson Davis40011
Webster37013
Wilkinson33520
Benton3255
Kemper32015
Sharkey28014
Jefferson27410
Franklin2373
Choctaw2046
Issaquena1074
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Alabama Coronavirus Cases

Confirmed Cases: 155915

Reported Deaths: 2674
CountyConfirmedDeaths
Jefferson22861374
Mobile14468314
Tuscaloosa10148139
Montgomery9875196
Madison915094
Shelby720462
Lee649665
Baldwin647569
Marshall433049
Calhoun418960
Etowah418749
Morgan403635
Houston369232
DeKalb330229
Elmore314852
St. Clair287142
Limestone276530
Walker272293
Talladega261035
Cullman235724
Lauderdale214841
Jackson210015
Autauga202330
Franklin202131
Colbert196731
Russell19233
Blount189325
Dallas186227
Chilton184132
Escambia171929
Coffee171710
Covington169929
Dale165451
Chambers133643
Pike132313
Tallapoosa130587
Clarke130017
Marion106229
Butler100140
Barbour9979
Marengo99222
Winston91313
Geneva8527
Pickens82417
Lawrence82131
Randolph81216
Bibb81114
Hale74930
Clay72912
Cherokee72614
Lowndes70328
Monroe64010
Henry6396
Bullock63717
Washington63412
Crenshaw60230
Perry5836
Wilcox56212
Fayette56113
Conecuh55713
Cleburne5438
Macon52920
Sumter47021
Lamar4665
Choctaw38812
Greene34216
Coosa2023
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