According to the news report by MarketWatch, stocks in the US all fell on Tuesday, with the Dow Jones Industrial Average turning negative for the year. This drop is now threatening to be the Dow’s longest streak of negative sessions. The plunge experience by the Index was a direct result of President Donald Trump threatening China with another $400 billion in tariffs. This is the latest in the escalating trade war between the two largest economies in the world.
The Dow Jones Industrial Average dropped by 1.3% or 312 points to close the day at 24,676. With this drop, the Index is now down by 0.2% for 2018 so far. Additionally, this is the blue-chip average’s sixth daily decline, which is the longest such streak it has seen since March of 2017.
The 50-day average, a closely monitored gauge for short term price momentum, seemed to give some support to the Dow. The current level is 24,646.79, however, if the 50-day average level rises, it could mean that the index has getting some buying support at that level.
The S&P 500 Index also dropped by 0.8%, or 21 points, to close trading at 2,753 points. The Nasdaq Composite Index also was down by 0.8%, a drop of 60 points to close the day at 7,687 points.
For the S&P 500, 11 of the primary sectors were down. The only sectors that made positive contributions were utilities, real estate and telecommunications.
Trump’s latest round of threats come after China retaliated against the US’s planned tariffs worth about $50 billion if Chinese imports. After the retaliation, late Monday evening, Trump directed the American trade representative Robert Lighthizer, to select another $200 billion worth of Chinese goods that could be charged 10% tariffs. Trump also stated that if China retaliated to this measure, then they would find another $200 billion worth of Chinese imports to tax.
The response from China’s Ministry of Commerce was that Trump was leaving China no choice but to take stronger measures. A spokesman from the Ministry stated that the trade war that the US was waging against China was both against the law of the market as well as the trend in development in the world today. He further stated that this war only serves to undermine the interests of both countries, their peoples as well as the interests of people all over the world.
The biggest fear that investors have is that this ever-growing trade war could end up negatively impacting economic growth across the globe, especially considering that the US GDP is expected to decelerate (while still remaining positive) over the next few years.
Asian markets also suffered serious declines, with the Chinese market getting the brunt of the impact. The Chinese stocks saw their worst close in the last two years.
Apple Inc.’s CEO Tim Cook also paid a visit to the White House last month, warning the government that an escalating trade war with China would have a direct impact on iPhone prices. The report about Cook visiting the White House was released on Monday, which caused the shares of all Apple suppliers to plunge in the ensuing trading.
Things went from bad to worse after the Senate passed a legislation that reinstated the ban on ZTE’s purchase of US components. This happened despite Trump attempting to save ZTE from this ban.
According to senior trader at Oanda, Stephen Innes, this has moved beyond the “tit-for-tat” level to an all-out trade war between the two countries, and it has investors running for cover as Indices across the world are falling in response to the situation.