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Trump Tweets About China Spark Sell-Off On Wall Street

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After recovering from an early move to the downside, stocks have pulled back sharply over the course of the trading session on Friday. The major averages have tumbled to new lows for the session after briefly turning positive.

In recent trading, the major averages have seen further downside. The Dow is currently down 442.12 points or 1.7 percent at 25,810.12, the Nasdaq is down 177.32 points or 2.2 percent at 7,814.07 and the S&P 500 is down 53.22 points or 1.8 percent at 2,869.73.

The sell-off on Wall Street comes amid renewed U.S.-China trade concerns after a series of threatening tweets from President Donald Trump.

Trump claimed the U.S. does not need China and would be "far better off without them" and subsequently ordered American companies to "immediately start looking for an alternative to China."

"The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP," Trump tweeted.

The president also indicated that he would respond to the newly announced Chinese tariffs on U.S. imports this afternoon.

The news of the Chinese tariffs contributed to the early weakness on Wall Street, as the Chinese Finance Ministry announced plans to impose new tariffs on $75 billion worth of U.S. imports.

The new levies include 5 percent tariffs on U.S. soybeans and crude oil imports, which are scheduled to take effect on September 1st.

The move by China comes in response to Trump's plan to impose a 10 percent tariff on $300 billion worth of Chinese imports.

Selling pressure waned shortly after the start of trading, however, with traders reacting positively to Federal Reserve Chairman Jerome Powell's highly anticipated speech at the Jackson Hole Economic Policy Symposium.

Powell reiterated during his prepared remarks that the central bank will "act as appropriate" to sustain the U.S. economic expansion.

"We are carefully watching developments as we assess their implications for the U.S. outlook and the path of monetary policy," Powell added.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said Powell's comment sounds "analogous to the 'closely monitor' language the Fed last used in the May FOMC statement to indicate a rate cut was coming soon."

"In contrast, in the July statement the FOMC only pledged to 'continue to monitor' the incoming data which, coupled with Powell's post-meeting press conference, gave the impression that the Fed wasn't in a rush to cut rates again," Ashworth said.

Ashworth subsequently believes that Powell's closely watched speech appears to open the door to another rate cut at the Fed's September meeting.

Meanwhile, Trump seemed less impressed by the Fed Chairman's remarks, going so far as to question if Powell is a "bigger enemy" than Chinese President Xi Jinping.

"As usual, the Fed did NOTHING! It is incredible that they can 'speak' without knowing or asking what I am doing, which will be announced shortly," Trump tweeted.

He added, "We have a very strong dollar and a very weak Fed. I will work 'brilliantly' with both, and the U.S. will do great."

While Powell is a Trump appointee, the president has repeatedly lashed out at the Fed for failing to heed his calls for dramatically lower interest rates.

Sector News

Reflecting the broad based nature of the sell-off, most of the major sectors are showing substantial moves to the downside on the day.

Semiconductor stocks have shown a particularly steep drop, dragging the Philadelphia Semiconductor Index down by 3.9 percent.

Considerable weakness is also visible among energy stocks, which have come under pressure as the price of crude oil for October delivery is plunging $1.70 to $53.65 a barrel.

Computer hardware, transportation, and chemical stocks are also seeing significant weakness, while gold stocks are bucking the downtrend amid a sharp increase by the price of the precious metal.

With gold for December delivery spiking $28.20 to $1,536.70 an ounce, the NYSE Arca Gold Bugs Index has surged up by 4.2 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index rose by 0.4 percent, while China's Shanghai Composite Index climbed by 0.5 percent.

Meanwhile, European stocks saw substantial volatility before closing sharply lower. While the U.K.'s FTSE 100 Index fell by 0.5 percent, the French CAC 40 Index and the German DAX Index slumped by 1.1 percent and 1.2 percent, respectively.

In the bond market, treasuries have shown a significant move to the upside in reaction to Trump's tweets. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 8.3 basis points at 1.527 percent.

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