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U.S. Stocks Fall Sharply As China Announces Retaliatory Tariffs


Stocks moved sharply lower over the course of the trading session on Monday amid concerns about a full-fledged trade war between the U.S. and China. The Dow tumbled to a three-month closing low, while the Nasdaq and the S&P 500 slumped to their lowest closing levels in over a month.

The major averages ended the session off their lows of the day but still firmly in negative territory. The Dow plunged 617.38 points or 2.4 percent to 25,324.99, the Nasdaq plummeted 269.92 points or 3.4 percent to 7,647.02 and the S&P 500 dove 69.53 points or 2.4 percent to 2,811.87.

The sell-off on Wall Street came after China announced plans to raise tariffs on $60 billion worth of U.S. goods, shrugging off a warning from U.S. President Donald Trump.

The move by China comes in retaliation for Trump's recent decision to raise tariffs on approximately $200 billion worth of Chinese goods to 25 percent from 10 percent.

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

Beijing is following through on its pledge to take "necessary countermeasures" in response to the U.S. tariff increase even though 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!"

Trump has previously threatened to raise tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion.

Sector News

Semiconductor stocks turned in some of the market's worst performances on the day amid concerns about the impact of the escalating trade dispute between the U.S. and China.

Reflecting the weakness in the sector, the Philadelphia Semiconductor Index plunged by 4.7 percent to its lowest closing level in over a month.

Substantial weakness was also visible among computer hardware stocks, as reflected by the 4.5 percent nosedive by the NYSE Arca Computer Hardware Index. The index also fell to a more than one-month closing low.

Oil service stocks also moved sharply lower, dragging the Philadelphia Oil Service Index down by 3.9 percent. The weakness in the sector came as the price of crude oil for June delivery fell $0.62 to $61.04 a barrel.

Steel, biotechnology, networking and banking stocks also saw considerable weakness amid broad based selling pressure.

Meanwhile, gold stocks were among the few groups bucking the downtrend, with the NYSE Arca Gold Bugs Index spiking by 3.5 percent amid a jump by the price of the precious metal.

Other Markets

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 also moved to the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.6 percent, the French CAC 40 Index and the German DAX Index tumbled by 1.2 percent and 1.5 percent, respectively.

In the bond market, treasuries moved significantly higher amid the sell-off on Wall Street. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dropped by 5 basis points to a more than one-month closing low of 2.405 percent.

Looking Ahead

Developments on the trade front are likely to remain in focus on Tuesday, overshadowing a report on import and exports prices in April.

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