Chinese Retaliatory Tariffs Lead To Sell-Off On Wall Street

wallstreet aug24 13may19

Following the substantial rebound seen over the course of the previous session, stocks have pulled back sharply in morning trading on Monday. The Dow has tumbled to a two-month intraday low, while the Nasdaq and the S&P 500 have hit their lowest levels in over a month.

The major averages have climbed off their lows of the session in recent trading but continue to post steep losses. The Dow is down 492.96 points or 1.9 percent at 25,449.41, the Nasdaq is down 211.26 points or 2.7 percent at 7,705.68 and the S&P 500 is down 56.50 points or 2 percent at 2,824.90.

The sell-off on Wall Street comes amid concerns about the escalating trade dispute between the U.S. and China after China announced plans to raise tariffs on up to $60 billion worth of U.S. goods.

China said increased tariffs on a total of 5,140 U.S. products would take effect June 1st, with the tariffs reportedly ranging from 5 percent to 25 percent.

The decision to raise tariffs on U.S. goods comes in retaliation for the U.S. move to increase the tariffs on approximately $200 billion worth of Chinese goods to 25 percent from 10 percent.

China is following through on its pledge to take "necessary countermeasures" in response to the tariff increase even though President Donald Trump warned the situation "will only get worse" if China retaliates.

Trump has sought to continue to pressure China to reach a trade agreement in a series of posts to Twitter, telling the communist country the deal will become "far worse for them if it has to be negotiated in my second term."

"I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don't make a deal because companies will be forced to leave China for other countries. Too expensive to buy in China," Trump tweeted. "You had a great deal, almost completed, & you backed out!"

Semiconductor stocks have shown a substantial move to the downside amid concerns about the impact of the U.S.-China trade dispute, with the Philadelphia Semiconductor Index plunging by 3.8 percent to its lowest intraday level in over a month.

Concerns about the outlook for global demand are also contributing to significant weakness among steel stocks, as reflected by the 3.7 percent nosedive by the NYSE Arca Steel Index.

Computer hardware, biotechnology, networking, and retail stocks are also seeing considerable weakness amid a broad based sell-off on Wall Street.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan's Nikkei 225 Index slid by 0.7 percent, while China's Shanghai Composite Index slumped by 1.2 percent.

The major European markets have also moved to the downside on the day. While the U.K.'s FTSE 100 Index has fallen by 0.6 percent, the French CAC 40 Index and the German DAX Index are down by 1.3 percent and 1.5 percent, respectively.

In the bond market, treasuries have moved notably higher amid the sell-off on Wall Street. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 4.6 basis points at 2.409 percent.

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