CNN

Dow plunges 724 points as trade war fears rock Wall Street

Mar 22, 2018, 6:05 PM | Updated: Jun 7, 2022, 4:00 pm
FILE PHOTO...
FILE PHOTO

(CNN Money) — Trade war fears rocked Wall Street on Thursday after President Trump launched a crackdown on China.

The Dow plummeted 724 points, or 2.9%, underlining mounting concerns among investors about looming tariffs on China. It was the fifth-largest point decline in history and the market’s worst day since the extreme turmoil of early February.

The S&P 500 dropped 2.5% and the Nasdaq 2.4%.

“A global trade war, whether it’s real or perceived, is what’s weighing on the market,” said Ian Winer, head of equities at Wedbush Securities. “There’s this huge uncertainty now. If China decides to get tough on agriculture or anything else, that will really spook people.”

Trump announced tariffs on about $50 billion worth of Chinese imports on Thursday afternoon. It’s not clear which products will be hit, but the action is aimed at curbing China’s troubling theft of US intellectual property.

“We have a tremendous intellectual property theft situation going on,” Trump said. He also described the US trade deficit with China as “out of control.”

Related: Why Trump’s tariffs on China are a big deal

China wasted little time in threatening to retaliate against the United States, underlining the risk of a tit-for-tat escalation that hurts global trade.

Beijing warned on Thursday it will “certainly take all necessary measures to resolutely defend” itself. China didn’t specify how it will respond, but US crops like soybeans are likely to be in the crosshairs.

“There is a lot of panic selling,” said Rich Guerrini, CEO of PNC Investments. “Are the tariffs a means of negotiating? There’s a decent chance of that, but it’s too early to tell.”

CNNMoney’s Fear & Greed Index, a measure of market sentiment, dropped further into “extreme fear.” The VIX volatility index soared 31%, though it remains well off the elevated levels of early February.

Wall Street’s biggest fear is a trade war, according to a recent survey of fund managers by Bank of America Merrill Lynch. The survey, released this week, found that for the first time since January 2017 the threat of a trade war topped inflation as the biggest risk to markets.

“What does this evolve into?” asked Mark Luschini, chief investment strategist at Janney Capital. “Should it denigrate into something that impairs business sentiment, that can feed into the economy and slow job growth.”

The biggest losers on the Dow on Thursday all have significant exposure to China: Caterpillar, 3M and Boeing. Each fell about 5%.

Michael Block, chief strategist at Rhino Trading Partners, said in a report that Trump’s tariff plan “has markets and the world at large freaking out a little.”

Related: These American companies could lose in a trade war with China

The trade crackdown is a big deal because the United States and China are the world’s two biggest economies. A major slowdown in trade could darken the otherwise bright economic outlook.

China is a major buyer of US crops, and Americans purchase tons of Chinese-made products. China is also America’s biggest creditor, owning more Treasuries than any other nation.

The euphoria that sent stocks skyrocketing to new heights as recently as January has disappeared. Fears about inflation and spiking bond yields caused an earthquake on Wall Street in early February. The market quickly tumbled into a correction, a 10% decline from previous highs.

But worries about inflation eventually faded, allowing the market to rebound. Now the focus is on Trump’s trade agenda.

Some market analysts questioned the wisdom of broad tariffs to tackle the very real problem of intellectual property theft.

“Isn’t there another way to deal with this that is more targeted?” Peter Boockvar, chief investment officer at The Bleakley Advisory Group, wrote in a report. “The American consumer again will be the pawn that pays for this.”

The trade worries could prove overdone if tensions between the United States and China ease.

Initial concerns about Trump’s tariffs on aluminum and steel relaxed after the administration softened its stance by offering exemptions for Canada and Mexico. The United States later granted tariff exemptions for major allies like the European Union, South Korea and Australia.

That news didn’t sit well with steel and aluminum makers. U.S. Steel plunged 11% and Alcoa dropped 6%.

Trade jitters weren’t the only reason for the sell-off. Tech stocks remain under pressure as Facebook reels from a user data crisis. Facebook, one of the most widely held stocks, lost another 2.7% on Thursday.

Bank stocks also stumbled, plunging nearly 4% as a group. Bank of America, Citigroup and Morgan Stanley fell sharply.

Nervousness on Wall Street wasn’t eased by the latest White House drama. The market fell further after Trump’s lead lawyer, John Dowd, resigned from the president’s personal legal team handling the Russia investigation.

Trump has recently taken a more aggressive stance against Special Counsel Robert Mueller. The market would probably fall sharply, at least at first, if Trump were to fire Mueller, analysts say.

Despite the market turmoil, analysts said the overall backdrop for stocks looks good. Job creation spiked to 313,000 in February, and corporate profits have surged to all-time highs.

“We have a strong economy with low unemployment. We don’t see wages spiking,” said PNC’s Guerrini.

The-CNN-Wire
™ & © 2018 Cable News Network, Inc., a Time Warner Company. All rights reserved.

KSL 5 TV Live

Top Stories

CNN

MIAMI, FLORIDA - MAY 02:  A Carnival Cruise ship is docked at the PortMiami as the company becomes ...
Jason Hanna and Melissa Alonso, CNN

Cruise ship passenger rescued from ocean isn’t sure how he went overboard, he tells ABC

An Alabama man who rescuers pulled from the Gulf of Mexico hours after he was reported missing from a cruise ship doesn't know how he wound up in the water.
17 hours ago
Lindsay Lohan thinks you should try Pilk.
(Pepsi)...
Danielle Wiener-Bronner, CNN Business

Pepsi wants you to drink soda mixed with milk this holiday season

Pepsi launched a campaign Thursday encouraging customers to try the combination of milk and pepsi for a holiday concoction.
2 days ago
Mauna Loa spewing lava on Tuesday. (Courtesy: Paradise Helicopters via )...
Holly Yan and Aya Elamroussi, CNN

Lava spilling toward key Hawaiian highway, but the gov says it’s safe to visit the Big Island

The world's largest active volcano is shooting fountains of lava more than 100 feet high and sending a river of molten rock down toward the main highway of Hawaii's Big Island.
2 days ago
A Mcdonalds restaurant with big golden arches in Logan, Utah....
Danielle Wiener-Bronner, CNN Business

This is what McDonald’s drive-thru of the future could look like

McDonald's is hoping a drive-thru lane with a food conveyor belt, a pickup room for delivery workers and a shelf where people can grab their orders will make life easier for customers on the go.
2 days ago
Jason David Frank's cause of death is revealed by his wife. Jason David Frank is pictured here in N...
Lisa Respers France, CNN

Jason David Frank’s cause of death revealed by his wife

Jason David Frank's wife has confirmed that the "Power Rangers" star's death was a result of suicide.
2 days ago
A general view of the city skyline is seen with the lights switched on just before the Earth Hour e...
Lilit Marcus, CNN

These are the world’s most expensive cities to live in 2022

Here are this year's top 10 most expensive cities to live in around the world, according to the Worldwide Cost of Living Index released by the Economist Intelligence Unit.
2 days ago

Sponsored Articles

house with for rent sign posted...
Chase Harrington, president and COO of Entrata

Top 5 reasons you may want to consider apartment life over owning a home

There are many benefits of renting that can be overshadowed by the allure of buying a home. Here are five reasons why renting might be right for you.
Festive kitchen in Christmas decorations. Christmas dining room....
Lighting Design

6 Holiday Decor Trends to Try in 2022

We've rounded out the top 6 holiday decor trends for 2022 so you can be ahead of the game before you start shopping. 
Happy diverse college or university students are having fun on their graduation day...
BYU MBA at the Marriott School of Business

How to choose what MBA program is right for you: Take this quiz before you apply!

Wondering what MBA program is right for you? Take this quiz before you apply to see if it will help you meet your goals.
Diverse Group of Energetic Professionals Team Meeting in Modern Office: Brainstorming IT Programmer...
Les Olson

Don’t let a ransomware attack get you down | Protect your workplace today with cyber insurance

Business owners and operators should be on guard to protect their workplace. Cyber insurance can protect you from online attacks.
Hand turning a thermostat knob to increase savings by decreasing energy consumption. Composite imag...
Lighting Design

5 Lighting Tips to Save Energy and Money in Your Home

Advances in lighting technology make it easier to use smart features to cut costs. Read for tips to save energy by using different lighting strategies in your home.
Portrait of smiling practitioner with multi-ethnic senior people...
Summit Vista

How retirement communities help with healthy aging

There are many benefits that retirement communities contribute to healthy aging. Learn more about how it can enhance your life, or the life of your loved ones.
Dow plunges 724 points as trade war fears rock Wall Street