Stocks Dive on Trade War Fears 03/22 15:44
Stocks plunged Thursday after the Trump administration slapped sanctions on
goods and investment from China.
NEW YORK (AP) -- Stocks plunged Thursday after the Trump administration
slapped sanctions on goods and investment from China. The Dow Jones industrial
average dropped more than 700 points as investors feared that trade tensions
between the world's largest economies would escalate.
The planned sanctions include tariffs on $48 billion worth of Chinese
imports as well as restrictions on Chinese investments. Trump said he's taking
those steps in response to theft of American technology, and the Chinese
government said it will defend itself. Investors are worried that trade
tensions would hurt U.S. companies and harm the world economy.
On Thursday they fled stocks and bought bonds, which sent bond prices higher
and yields lower. With interest rates falling, banks took some of the worst
losses. Technology and industrial companies, basic materials makers and health
care companies also fell sharply.
Peter Donisanu, an investment strategy analyst for the Wells Fargo
Investment Institute, said the risk of a damaging trade war is still low
because the Trump administration is targeting specific goods that aren't
central to China's economy. That could change if it puts tariffs on products
like electronics or appliances imported from China.
"If the Trump administration really wanted to hurt China and start a trade
war, then they would go after those larger sectors," he said. Still, Donisanu
said that after last year's rally, investors are looking for new reasons to
feel optimistic about stocks. With trade tensions in focus over the last month,
they've had trouble finding any.
The S&P 500 index skidded 68.24 points, or 2.5 percent, to 2,643.69. The Dow
Jones industrial average sank 724.42 points, or 2.9 percent, to 23,957.89. The
Nasdaq composite gave up 178.61 points, or 2.4 percent, to 7,166.68. The
Russell 2000 index of smaller-company stocks lost 35.43 points, or 2.2 percent,
Construction equipment maker Caterpillar fell $8.90, or 5.7 percent, to
$146.90, for its worst loss since mid-2016. Aerospace company Boeing slid
$17.49, or 5.2 percent, to $319.61.
Investors also sold some of the market's biggest recent winners. Among
technology companies, Microsoft fell $2.69, or 2.9 percent, to $89.79 and
Alphabet, Google's parent company, fell $40.85, or 3.7 percent, to $1,053.15.
Online retailer Amazon slid $36.94, or 2.3 percent, to $1,544.92.
Earlier this month the Trump administration ordered tariffs on imported
steel and aluminum, and stocks dropped as investors worried about the
possibility of tougher restrictions on international trade and smaller profits
Their fears eased when the administration said some countries will be exempt
from the tariffs. That continued Thursday, as U.S. Trade Representative Robert
Lighthizer said the tariffs won't apply to the European Union, Canada, Mexico,
Argentina, Brazil and Australia.
Donisanu, of Wells Fargo, said the Trump administration isn't hostile to
trade necessarily, but wants to get other countries to revise the terms of
America's trade deals.
"This is probably intended to get China to get more serious in discussions
around violations of intellectual property rights and addressing those issues,"
Bond prices climbed, sending yields lower. The yield on the 10-year Treasury
note slipped to 2.82 percent from 2.88 percent. Falling bond yields are bad for
banks because they force interest rates on loans lower. Bank of America lost
$1.32, or 4.1 percent, to $30.55 and JPMorgan Chase gave up $4.79, or 4.2
percent, to $109.95.
Utility companies and real estate investment trusts moved higher. When bond
yields decline, investors often bid up those stocks and others that pay big
The decline in rates comes a day after the Federal Reserve raised interest
rates and said the U.S. economy and the job market continued to improve over
the last two months. The Fed expects to raise rates three times this year,
although some investors think a fourth increase is possible. The Fed also said
it might raise rates three more times next year instead of two.
Overseas markets closed mostly lower. Germany's DAX lost 1.7 percent and the
CAC 40 in France shed 1.4 percent. Britain's FTSE 100 dropped 1.2 percent. Hong
Kong's Hang Seng dropped 1.1 percent. The Nikkei 225 in Japan index gained 1
percent and the South Korean Kospi added 0.4 percent.
AbbVie plunged after it reported disappointing results from a study of its
cancer therapy Rova-T. AbbVie canceled its plans to ask for faster approval of
Rova-T as a treatment for small cell lung cancer, but other studies are
continuing. AbbVie shed $14.35, or 12.8 percent, to $98.10. Other health care
stocks also sank.
Benchmark U.S. crude oil shed 87 cents, or 1.3 percent, to $64.30 a barrel
in New York. Brent crude, used to price international oils, fell 56 cents, or
0.8 percent, to $68.91 a barrel in London.
Wholesale gasoline remained at $2.01 a gallon. Heating oil lost 1 cent to
$1.99 a gallon. Natural gas lost 3 cents to $2.62 per 1,000 cubic feet.
Gold edged up $5.90 to $1,327.40 an ounce. Silver fell 3 cents to $16.39 an
ounce. Copper lost 4 cents to $3.02 a pound.
The dollar fell to 105.61 yen from 106.10 yen. The euro rose to $1.2307 from