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: 314710

Reported Deaths: 7254
CountyCasesDeaths
DeSoto21646260
Hinds20369416
Harrison17949309
Rankin13643278
Jackson13450246
Madison10113217
Lee9986174
Jones8384163
Forrest7689152
Lauderdale7198240
Lowndes6403148
Lamar623686
Lafayette6203119
Washington5341134
Bolivar4802132
Oktibbeha462998
Panola4596107
Pearl River4519146
Marshall4450103
Warren4393121
Pontotoc420872
Monroe4115133
Union411176
Neshoba4031176
Lincoln3969110
Hancock379586
Leflore3498125
Sunflower336290
Tate334784
Pike3327105
Scott316274
Alcorn313368
Yazoo311770
Itawamba300577
Copiah297465
Coahoma295579
Simpson295388
Tippah288768
Adams286982
Prentiss280060
Marion269380
Leake268473
Wayne262841
Grenada261587
Covington259881
George248148
Newton246862
Winston227581
Tishomingo227067
Jasper221148
Attala214473
Chickasaw208057
Holmes189174
Clay185554
Stone182833
Tallahatchie178941
Clarke178080
Calhoun170932
Yalobusha164638
Smith162534
Walthall134245
Greene130633
Lawrence128724
Montgomery127142
Noxubee126734
Perry126338
Amite123142
Carroll121829
Webster114532
Jefferson Davis107133
Tunica105726
Claiborne102430
Benton100025
Humphreys96733
Kemper95828
Franklin83923
Quitman81116
Choctaw76418
Wilkinson67531
Jefferson65728
Sharkey50217
Issaquena1686
Unassigned00

Alabama Coronavirus Cases

Cases: 540083

Reported Deaths: 11038
CountyCasesDeaths
Jefferson798481529
Mobile41283809
Madison35157506
Tuscaloosa25925455
Shelby25302249
Montgomery24723593
Baldwin21411310
Lee15993172
Calhoun14574319
Morgan14425280
Etowah13925353
Marshall12280225
Houston10648282
Elmore10158206
Limestone10070151
St. Clair9948245
Cullman9768194
Lauderdale9460243
DeKalb8865188
Talladega8341176
Walker7261278
Autauga7005108
Jackson6840112
Blount6773139
Colbert6322135
Coffee5581118
Dale4877113
Russell445738
Chilton4373113
Franklin426382
Covington4138118
Tallapoosa4044153
Escambia394877
Chambers3596123
Dallas3569153
Clarke351561
Marion3140101
Pike312077
Lawrence303098
Winston275873
Bibb264764
Geneva254178
Marengo249865
Pickens234862
Barbour232056
Hale224078
Butler219169
Fayette212862
Henry189943
Cherokee184845
Randolph182542
Monroe178141
Washington167839
Macon161350
Clay157257
Crenshaw153557
Cleburne149641
Lamar143336
Lowndes140653
Wilcox127430
Bullock123242
Conecuh110829
Coosa109228
Perry107826
Sumter105032
Greene92634
Choctaw61024
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