The selloff in U.S. stocks deepened as the White House’s latest trade bluster rattled global financial markets.
The S&P 500 Index plunged more than 2 percent and all 30 members of the Dow Jones Industrial Average retreated as President Donald Trump ordered ordered a review of additional tariffs that prompted an aggressive response from China. Fresh attempts by White House officials to tone down the bluster failed to calm nerves, with the Cboe Volatility Index back above 21. Treasury Secretary Steven Mnuchin added to the anxiety by saying there’s a “level of risk” the spat could worsen.
Trump said the market turmoil was short-term “pain,” but insisted the outcome would leave the U.S. in a better position. The president’s top economic adviser said the U.S. and China are holding “back-channel discussions” to resolve an escalating trade dispute that has unsettled global financial markets. China earlier said no talks were ongoing.
The trade tensions overshadowed the latest U.S. jobs report, which showed hiring cooled by more than forecast in March. The renewed saber rattling provided a bookend to a week that started with equities tumbling amid amplified rhetoric. That gave way to a three-day rally after White House officials signaled the president’s tough talk was part of a negotiating plan.
“It’s bad when this happens on a Friday, because then people get freaked out over the weekend,” Donald Selkin, New York-based chief market strategist at Newbridge Securities Corp, said by phone. “The worst thing you want to see is a bad market late on a Friday.”
Stocks have changed direction again and again this week as investors tried to get a sense of whether a trade dispute between the two nations will escalate, an outcome that could have major consequences for the global economy. The market didn’t get any help from a March jobs report that was weaker than expected.
The Dow Jones industrial average was down more than 700 points in the final hour of trading.
The losses at the TSX were more modest, with the S&P/TSX Composite Index down about 150 points, or 1 per cent, at mid-afternoon.
The Dow average, which contains numerous multinational companies including industrial powerhouses Boeing and Caterpillar, has swung dramatically this week, with about 1,300 points separating its highest and lowest marks. It fell as much as 758 points Monday, then recovered all of those losses, and late Thursday it was up as much as 519 points for the week. It’s down 0.7 per cent for the week.
The administration spent the past few days reassuring investors that it’s not rushing into a trade war, and China’s government has done the same. But late Thursday, President Donald Trump ordered the U.S. Trade Representative to consider placing tariffs on $100 billion in duties on Chinese imports. China said it would “counterattack with great strength” if he that happens.
Stocks dipped further after Trump criticized the World Trade Organization on Twitter Friday morning.
At the start of the week, the U.S. announced plans to put tariffs on $50 billion in goods imported from China, and the Chinese government responded with measures of equal size. Stocks plunged on Monday, but they rallied over the next few days as officials from both countries said they were open to talks and that the tariffs might never go into effect.
With administration officials sounding conciliatory one day and more hostile the next and the president always quick to fire off another tweet, investors simply don’t know what the U.S. wants to achieve, said Katie Nixon, chief investment officer for Northern Trust Wealth Management.
“The process itself seems to be quite chaotic,” she said. “We’re not quite sure what the long term strategy is.”
Still, she said businesses support the idea of making changes in America’s trade relationship with China. But even though investors are optimistic about the state of the global economy and company profits continue to grow, Nixon said the administration is creating the thing investors hate the most: uncertainty.
Technology companies make a lot of their sales in Asia and they have struggled as Wall Street worries about a slowdown in global economic growth. Optimism about the world economy has helped many tech companies make huge gains in the last year.
Apple skidded $3.46, or 2 per cent, to $169.34 and Cisco Systems declined 98 cents, or 2.4 per cent, to $40.84. PayPal dipped $2.63, or 3.4 per cent, to $74.32.
Industrial companies might face the worst pain from tariffs, as they could find themselves dealing with higher costs for components imported into the U.S. while the duties on their goods in China harm their sales.
Caterpillar, a construction equipment maker, shed $584, or 3.9 per cent, to $142.29 while farm equipment company Deere sank $5.56, or 3.7 per cent, to $145.79. Aerospace giant Boeing dipped $12.20, or 3.6 per cent, to $324.20.
Health care companies also declined. Johnson & Johnson sank $2.99, or 2.3 per cent, to $127.72 and health insurer UnitedHealth dropped $59, or 2.6 per cent, to $223.18.
Employers added 103,000 jobs in March, which is weaker than the last few months. The Labor Department also said fewer jobs were added in January and February that it initially estimated. The unemployment rate remained low and the job market looks fundamentally healthy, but it’s possible some employers are struggling to find workers.
Benchmark U.S. crude dropped $1.17, or 1.8 per cent, to $62.37 a barrel in New York while Brent crude, used to price international oils, lost 92 cents, or 1.3 per cent, to $67.41 per barrel in London. Oil prices have also been volatile this week, as investors wonder if an increase in trade tensions will reduce demand for oil by slowing down the global economy.
Bond prices rose, sending yields lower. The yield on the 10-year Treasury fell to 2.78 per cent from 2.83 per cent. The lower yields mean banks can’t make as much money from lending, and that send bank stocks lower. JPMorgan Chase fell $3.23, or 2.9 per cent, to $108.65 and BB&T lost $1.89, or 3.6 per cent, to $51.
Gold rose $7.60 to $1,336.10 an ounce. Silver edged up 1 cent to $16.36 an ounce. Copper fell 2 cents to $3.06 a pound.
With files from Reuters and Bloomberg News