Stocks fell broadly on Wall Street in afternoon trading Monday after President Donald Trump threatened to escalate the trade war between the U.S. and China.
Investors have been expecting the world’s two largest economies to resolve their damaging trade dispute, with the two sides set to meet this week in Washington. Hopes for an accord have contributed to the big run-up in stock prices in the U.S. and China so far this year. The S&P 500 and Nasdaq hit all-time highs last week.
U.S. companies with heavy business interests in China were getting hit the hardest, particularly technology and industrial companies. Banks also fell sharply. The market’s slide followed a sell-off in Europe and Asia.
The Dow Jones Industrial Average fell 159 points, or 0.6%, to 26,345 as of 2:20 p.m. Eastern Time. It was down as much as 471 in the first few minutes of trading.
The S&P 500 index dropped 0.7% and the Nasdaq slid 0.9%.
President Trump threatened on Sunday to raise tariffs on imports from China to 25% from 10%, saying that trade talks were moving too slowly. He also threatened to impose tariffs on another $325 billion in imports from China, covering everything the country ships annually to the United States.
Tariffs currently in place have already raised costs on goods for companies and consumers.
The latest developments shook investors’ recent optimism that Washington and Beijing were close to working out a trade deal. Still, the initial wave of selling Monday did ease somewhat as the day went on, which signals that investors’ trade deal hopes haven’t dimmed entirely.
“You’ve seen that the sell-off has been so far contained and part of that is the perception that the president has done this before,” said Marina Severinovsky, investment strategist at Schroders.
She still expects a deal to be struck sometime in the next two months and said much of the president’s latest comments on the negotiations comes down to posturing.
“We’ve become much more inured to this sort of drama just because he does tweet every day.”
Every sector, from industrial companies to retailers, was under pressure Monday. Chipmakers and technology companies suffered the most.
Qualcomm, which gets 64.7% of its revenue from China, fell 1.7%. Broadcom slid 1.6% and Apple dropped 2%.
Micron Technology, Advance Micro Devices and Applied Materials all fell more than 3%.
Industrial behemoth Caterpillar lost 1.7%, while Deere & Co. gave up 4.7%.
Wynn Resorts, with a host of casinos and hotels in Macau, gets about 75% of its revenue from China. Its stock tumbled 4.2%.
Investors fled to safer holdings. Bond prices rose sharply, sending yields lower, and safe-play stocks like utilities, real estate companies and makers of consumer products held up much better than the rest of the market.
Energy stocks were holding on to modest gains as crude oil prices recovered from an early slide.
Chinese indexes plunged. The Shanghai Composite index closed 5.6% lower and Hong Kong’s Hang Seng index sank 2.9%. European indexes fell broadly.
Shares of Chinese companies that trade in the U.S. also fell. J.D.com slid 4.4%, while internet search company Baidu dropped 2.6%.
Investors have been digesting mixed reports about the U.S.-China trade talks for months and have largely discounted concerns about a failure in negotiations. The broader market has been posting gains all year on encouraging economic growth and solid corporate earnings results.
“We see the weekend’s developments as a negative catalyst for the market, not only because of where investor expectations have been regarding the deal, but because of the downward earnings revisions that are likely to occur if the tariffs are expanded,” said Lori Calvasina, head of U.S. equity strategy at RBC Capital, in a note to clients.
Boeing fell 1.7% after it disclosed that it did not warn airlines about a faulty safety alert until after one of its planes crashed.
The sensors malfunctioned during an October flight in Indonesia and another in March in Ethiopia, causing software on the plane to push the nose down. Pilots were unable to regain control of either plane, and both crashed, killing 346 people.
Boeing said Sunday that it discovered after airlines had been flying its 737 Max airplane for several months that a safety alert in the cockpit was not working as intended, yet it didn’t disclose that fact to airlines or federal regulators until after one of the planes crashed.
Anadarko Petroleum Corp. rose 4% after Occidental revised its buyout offer to include more cash. Occidental is still offering $76 per share, but that now involves $59 per share in cash instead of $38.