Stocks extended last week’s losses as prospects for a breakthrough in U.S.-China trade discussions dimmed.
The S&P 500 (^GSPC) fell 2.41%, or 69.53 points, as of market close. The Dow (^DJI) fell 2.38%, or 617.38 points, after earlier in the session being down more than 700 points. The Nasdaq (^IXIC) declined 3.41%, or 269.92 points.
China is set to impose a tariff rate of as high as 25% on a portion of $60 billion worth of U.S. goods starting June 1, the Chinese government announced Monday. The move is an apparent retaliation against the recent hike to levies the Trump administration implemented on billions of dollars worth of Chinese imports late last week.
On Friday, the Trump administration raised the rate of tariffs on $200 billion worth of Chinese imports to 25%, and announced that further tariffs on another $300 billion in imports would be forthcoming. Trump has claimed repeatedly that China “broke the deal” the two sides had been working toward over the past several months, leading to the use of tariffs to try and extract further concessions.
The sudden end to five months of a trade ceasefire with China rattled markets, dragging the S&P 500 to its worst weekly decline since just before Christmas. Meanwhile, haven assets have continued to rise, with the yield on the 10-year Treasury note falling to 3.3874%, or the lowest intraday level since the end of March.
RELATED: Take a look at the products directly hit by Trump's tariffs:
Products directly hit by Trump's tariffs on Chinese goods
Products directly hit by Trump's tariffs on Chinese goods
Meat: pork; beef intestine; rabbit meat; venison; frog legs
Fish and seafood:live fish including ornamental fish, trout, eels, tuna, and carp; chilled or frozen meat of various types of trout, salmon, halibut, plaice, sole, albacore, tuna, herring, mackerel, cobia, swordfish, pollack, whiting, catfish, rays, and more; various types of salted or smoked fish; other seafood including various types of lobsters, crabs, shrimps, prawns, oysters, scallops, mussels, clams, squid, octopus, conchs, abalone, sea cucumbers, and sea urchins.
Non-meat animal products such as eggs and dairy:Whey products; butter; various types of eggs including chicken; honey; hair of animals including human, hog, horse and badger; animal intestines, bladders; feathers; bones including shells, beaks, corals, hooves, antlers, and more.
Vegetables:onions; garlic; cauliflower and broccoli; cabbage; carrots; turnips; radishes; beats; cucumbers; peas of various types; beans; lentils; celery; mushrooms; peppers of various types; squash; okra; sweet corn; potatoes; sweet potatoes and yams; some types of tomatoes; spinach; Brussels sprouts.
Fruit and Nuts: Coconuts; cashews; almonds; hazelnuts; walnuts; chestnuts; pistachios; macadamia nuts; pecans; dates; figs; pineapples; guavas; oranges; mandarins; clementines; raisins; grapes; apples; pears; quinces; peaches; berries including strawberries, raspberries, cranberries, blueberries and others; bananas; a variety of dried fruits; peels of various fruits.
Cereals: wheat, including durum wheat; barley; oats; corn; various types of rice; grain sorghum; buckwheat; quinoa; and more.
Mill products: flours including those form wheat, corn, buckwheat, rice, rye, other cereals, potatoes, and bananas; groats and meal of various types including wheat, corn, oats, and rice; malt; starches of wheat, corn, potato, and more
Oil seeds: soybeans; seeds of sunflower, flax seed, sesame, mustard, poppy and more; planting seeds for certain crops; cocoas and mint leaves; and seaweeds.
Sugars and candies: cane sugar; candies with no cocoa
Breads and Pasta: uncooked pasta; various breads, pastries, cakes, and biscuits.
Prepared vegetables and fruits: various vegetables and fruits previously listen in their prepared or preserved forms; various fruit jams including strawberry, pineapple, apricot, and more; peanut butter; various fruit juices including orange, pineapple, lime, grape, apple, and more.
Other food items: soy sauce; condiments and seasonings; protein concentrates.
Beverages and vinegars: water, including mineral water; fruit or vegetable juices and juice mixes; beer from malt; wine, including rice wine; ethyl alcohol; vinegars
Food processing waste and animal feed: brans from processing; oil cakes; dog or cat food; animal feed
Tobacco products: various types and preparations of tobacco; tobacco refuse; cigars; cigarettes; smoking tobacco
Salts and minerals: salt/sodium chloride; sulfur; graphite; quartz; types of clays; chalk; slate; marble; granite; sandstone; dolomite; gypsum; some plasters; some types of cement; mica; Epsom salts
Ores, slag, and ash: ores of iron, copper, nickel, cobalt, aluminum, lead, zinc, tin, chromium, tungsten, uranium, titanium, silver, other precious metals, and others; slag, various types of ash.
Mineral fuels and oils: coal; lignite; peat; coke; tars; various types of light oil; various types of kerosene; petroleum oils; liquefied fuels including natural gas, propane, butane, ethylene, and petroleum; oil shale and tar sands
Inorganic Chemicals: chemicals such as chlorine, sulfur; carbon, nitrogen, oxygen, and silicon; acids including sulfuric, nitric, and more; various types of fluorides, chlorides, sulfates, nitrates, carbonates, and more.
Fertilizers: animal or vegetable fertilizers; urea; ammonium sulfate; sodium nitrate; and more.
Tanning and drying extracts, dyes, and paints
Essential oils, perfumes: perfume; lip or eye make up preparations; manicure or pedicure products; shampoo; hairspray; bath salts.
Soaps and cleaning products: various types of soap; leather and textile treatments; polishes for shoes and furniture.
Glues, adhesives, and enzymes
Cigarette lighter fluid
Photographic goods: various types of photo plates; instant film; various types of film in rolls; various types of motion picture film.
Various chemical products: pesticides; herbicides; fungicides
Plastics: vinyl flooring and other plastic floor and wall coverings; sausage casings; bags; gloves including baseball gloves; rain jackets; machinery belts.
Rubber: latex; rods, tubes, and other products; conveyor belts; various types of transmission belts; various types of pneumatic tires; gloves; gaskets; dock fenders.
Raw hides and leather: animal skins including cow, buffalo, sheep, goats, reptile; various types of leather made from cow, buffalo, sheep, goats, reptile; leather trunks and suitcases; leather handbags; CD cases; gloves including ski, ice hockey, and typical use; belts; fur clothing, incluidng artificial fur.
Wood: fuel wood; charcoal; various types of wood including oak, beech, maple, ash and cherry; moldings; rods; particleboard; various types of plywood; doors; corks and stoppers; wicker and bamboo baskets.
Other textile products, rope, twine: hammocks; fish nets; carpets;
Fabrics: corduroy; gauze; terry towel; lace; badges; embroidery
Headgear: caps; hairnets; wool hats; head bands
Stone, plaster, cement, asbestos: stone for art; marble slabs; roofing slate; millstones; sandpaper; floor or wall tiles; cement bricks.
Ceramics: fire bricks; pipes; tiles; porcelain and china.
Glass and glassware: balls; rods; drawn or blown glass; float glass; tempered safety glass; mirrors; carboys, bottles, jars, pots, flasks, and other containers; microscope slides; woven fiberglass
Precious stones and pearls: industrial diamonds; silver and products made of silver; gold and products made of gold; platinum; palladium.
Iron and steel and products derived from the metals:drums; tubes; pipes; doors; windows; screws; horseshoes;
Copper: plates; cables; tubes; pipes; springs
Nickel: bars; rods; wires
Aluminum:powder; cable; wire; screws.
Various metal products, tools, cutlery: industrial items made from lead, zinc, tin, and more; saw blades; bolt cutters; hammers; wrenches; crow bars.
Machinery, both industrial and retail: steam turbines; engines; fuel-injection pumps; air compressors; air conditioning machines; refrigerators; cream separators; hydraulic jacks; escalators; manure spreaders; copiers; automatic beverage-vending machines
Electronics: vacuum cleaners; hair clippers; spark plugs; generators; bicycle lights; electric amps; television cameras; various types of TVs; video projectors.
Vehicles and parts: axles; driving shafts; gear boxes; radiators.
Ships and boats: sailboats; motorboats; canoes; yachts.
Instruments for scientific or medical purposes: microscopes; cameras for non-art purposes; gauges for pressure, electrical currents, and more.
Clocks and watches
Furniture, bedding, mattresses: car seats; wood chairs; furniture designed for offices, kitchens, and more; mattresses; chandeliers; lamps.
Assorted items: buttons; stamps; paintings; collections of zoological, botanical, mineralogical, anatomical, historical, archaeological interest; antiques of an age exceeding one hundred years
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BACK TO SLIDE
The CBOE Volatility Index, or VIX, jumped to above 19.6 as of 9:47 a.m. ET. The so-called “fear” gauge measuring risk and investor sentiment initially spiked after 8:10 a.m. ET, after the first reports of China’s retaliatory tariffs were released.
Analysts are bracing for the escalating trade tensions to brake the pace of growth in the U.S. In the first quarter, the U.S. economy expanded at a better-than-expected rate of 3.2%.
“With rising protectionist measures, the damage to economic growth is increasing. If current U.S. measures and those likely to be taken by China remain in place, GDP can be expected to be hit to the tune of 0.5% in China, 0.25% in the U.S., and 0.15% globally,” Klaus Baader of Societe Generale wrote in a note. “If the U.S. levies tariffs on all Chinese goods, and China retaliates, these losses could easily double.”
Others prognosticators noted that the implications of tariffs will hit companies’ bottom lines and the broader economy.
“But demand destruction and ailing confidence increase the potential impacts well beyond just higher costs and would likely lead to an economic recession in our view,” he added.
A further deterioration of trade-deal progress would apply broad downward pressure to equities, some sectors are especially vulnerable. Shares of manufacturing bellwethers including Caterpillar (CAT) and 3M (MMM) each dropped by more than 5% last week, underperforming the broader market’s about 2% decline.
Tech investors are also watching trade talks unfold “with white knuckles,” Wedbush analyst Dan Ives wrote in a note.
“The core underlying fear in the eyes of tech investors is around what this move as well as a retaliation move from the Chinese can do to the tech food chain, semi stocks (Intel, Nvidia, etc.), and clearly Apple, which heavily relies on China both on the supply (Foxconn) as well as demand front,” Ives said.
“With worries that Trump potentially plans to enact additional tariffs on Chinese goods down the road if this trade situation spiral further, tech stocks are ultimately caught in the crossfire, with Apple and the semiconductor space remaining front and center and thus weighing on stocks accordingly this morning,” he added.