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U.S. Stocks Plummet As Trump Orders U.S. Companies To Find Alternative To China

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Stocks succumbed to substantial selling pressure over the course of the trading day on Friday after seeing considerable volatility early in the session. The major averages all moved sharply lower after ending the previous session mixed.

The major averages climbed off their worst levels going into the close but still posted steep losses. The Dow tumbled 623.34 points or 2.4 percent to 25,628.90, the Nasdaq plummeted 239.62 points or 3 percent to 7,751.77 and the S&P 500 plunged 75.84 points or 2.6 percent to 2,847.11.

With the significant decrease on the day, the major averages moved notably lower for the week. The Nasdaq slumped by 1.8 percent, the S&P 500 slid by 1.4 percent and the Dow fell by 1 percent.

The sell-off on Wall Street came 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 tweets from Trump came after 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 was in response to Trump's plan to impose a 10 percent tariff on $300 billion worth of Chinese imports.

Trump's tweets offset a positive reaction 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

Most of the major sectors showed substantial moves to the downside on the day, reflecting the broad based nature of the sell-off.

Energy stocks showed a particularly steep drop, as the price of crude oil for October delivery tumbled $1.18 to $54.17 a barrel amid concerns about the outlook for global energy demand.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plummeted by 5.3 percent, while the NYSE Arca Natural Gas Index and the NYSE Arca Oil Index plunged by 4.2 percent and 3.4 percent, respectively.

Substantial weakness was also visible among semiconductor stocks, as reflected by the 4.4 percent nosedive by the Philadelphia Semiconductor Index.

Transportation, computer hardware, networking, and banking stocks also saw considerable weakness, while gold stocks were among the only groups to buck the downtrend amid a sharp increase by the price of the precious metal.

With gold for December delivery spiking $29.10 to $1,537.60 an ounce, the NYSE Arca Gold Bugs Index surged up by 4.6 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 showed 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, tumbled by 8.2 basis points to 1.528 percent.

Looking Ahead

Any further developments on the trade front may impact trading next week along with reports on durable goods orders, consumer confidence, and personal income and spending.

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