S&P 500 falls 2% after Trump threatens more tariffs on China
The S&P 500 fell two percent after US President Donald Trump broke a month-long lull on Wall Street by threatening to raise tariffs on China. A key measure of Wall Street’s health is headed for its worst loss since April.
The Dow Jones Industrial Average fell 622 points and the Nasdaq Composite fell 2.7 percent. Stocks were on track for modest gains in the morning until Trump took to his social media platforms and said he was considering a steep increase in tariffs on Chinese imports.
He is troubled by restrictions imposed by China on exports of its rare earths, materials that are vital to the manufacturing of everything from consumer electronics to jet engines.
“We have been contacted by other countries who are extremely outraged by this great trade hostility that has suddenly arisen,” Trump wrote on Truth Social. He also said he “sees no reason now” to meet Chinese leader Xi Jinping, having previously agreed to do so as part of an upcoming visit to South Korea.
Rising tensions between the world’s two largest economies led to widespread declines on Wall Street, with nearly four out of every five stocks within the S&P 500 falling. Everything from big tech companies like Nvidia and Apple to shares of smaller companies trying to recover from uncertainty about tariffs and trade sank.
U.S. stocks were already facing widespread criticism that their prices were too high after sending the S&P 500 to record highs after a sustained surge of nearly 35 percent from an April low.
Critics say the market looks too expensive after prices rose much faster than corporate profits. Concerns are particularly high about companies in the artificial-intelligence industry, where comparisons are being made to the dot-com bubble in 2000 that eventually burst. To make stocks appear less expensive, either their prices need to fall, or profits need to increase.
Levi Strauss fell 11.4 percent to account for one of the market’s biggest losses, even though it posted a stronger profit than analysts expected in the latest quarter.
Its full-year profit forecast was also within Wall Street’s expectations, but the jeans and apparel maker may face the challenge of inflated expectations. Its share price has increased by an impressive 42 percent so far this year.
Oil markets react strongly
Friday’s strongest action was in the oil market, where the price of a barrel of benchmark US crude fell 4.1 per cent to US$58.99.
It fell as a ceasefire between Israel and Hamas took effect in Gaza, raising hopes of less violence in the Middle East. The end of the war may ease concerns about oil supply disruptions, which have kept the price of crude higher than otherwise.
Brent crude, the international benchmark, fell 3.9 percent to $62.66 a barrel. In the bond market, the yield on the 10-year Treasury fell to 4.07 percent from 4.14 percent late Thursday.
A report from the University of Michigan suggested that sentiment among US consumers remains bearish.
According to Joan Su, director of consumer surveys, “Pocketbook issues such as high prices and weak job prospects remain at the forefront of consumers’ minds.” “At this time, consumers do not expect meaningful improvements in these factors.”
The job market has slowed so much that the Federal Reserve cut its key interest rate last month for the first time this year. Fed officials are also considering several more rate cuts by the end of next year to provide further relief to the economy.
But Chairman Jerome Powell has also said that he may have to change his stance if inflation remains high. This is because low interest rates can increase inflation even more.
In an encouraging sign, a preliminary survey from the University of Michigan said consumers’ expectations for inflation in the coming year fell to 4.6 percent from 4.7 percent last month. Although it is still high, the direction of change could still help the Fed by limiting the upward pressure on inflation.
In stock markets abroad, indices fell in much of Europe and Asia.
Hong Kong’s Hang Seng fell 1.7 percent, and Japan’s Nikkei 225 fell 1 percent in two big moves. But South Korea’s Kospi jumped 1.7 percent when trading reopened after the holiday.
