Dow ends bruising session 2.3% lower on trade war fears

Javier Howell
April 10, 2018

The index plunged on Monday, rising throughout most of mid-week only to end Friday with a weekly loss of 1.38% and a daily loss of 2.19%.

US stocks closed sharply lower Friday as Wall Street reacted to the latest escalation in the trade fight between the USA and China. "The tariff threats, even if only intended as bargaining tools, will be hard to back down from if talks fail to deliver results", Capital Economics' Julian Evans-Pritchard wrote in a research note Friday.

Negative sentiment in the stock market was fueled after President Trump threatened another $100 billion of tariffs on China imports.

"China, which is a great economic power, is considered a Developing Nation within the World Trade Organization", the president tweeted on Friday. "In the meantime, there will be ongoing noise around the issue", and financial markets will remain volatile".

"The market is getting more concerned about the possibility of a trade war between the United States and China", said Tom Cahill, portfolio strategist at Ventura Wealth Management. Still, Pride said all of the proposed tariffs add up to a pretty small fraction of trade between the US and China, and overall, they wouldn't affect the nation's economy that much if they do go into effect.

"I feel like this is a typical reaction, but I think that it will come back around", said Zach Holt.

Industrial companies might face the worst pain from tariffs, as they could find themselves dealing with higher costs for components imported into the US while the duties on their goods in China harm their sales.

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.

"The stock market is in a bit of a tug of war", says Allen Bond, portfolio manager of the Jensen Quality Growth Fund.

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.

The administration was running a "good cop, bad cop kind of negotiating strategy", said Sam Stovall, chief investment strategist at CFRA Research.

The combination of the hiring slowdown and modest wage growth temporarily eased Wall Street's concerns that the economy was overheating.

The yield on the benchmark 10-year Treasury note settled at 2.830%, up from 2.788% on Wednesday.

The US Census Bureau will release trade balance data for February at 8:30 a.m. ET.

Other reports by Insurance News

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