Trade War Concerns Contributing To Extended Sell-Off On Wall Street

Stocks have moved sharply lower during trading on Tuesday, adding to the steep losses posted in the previous session. The tech-heavy Nasdaq has tumbled to its lowest intraday level in almost four months, while the S&P 500 has slumped to a three-month intraday low.

Currently, the major averages are off their worst levels of the day but still firmly negative. The Dow is down 671.16 points or 1.6 percent at 42,520.08, the Nasdaq is down 266.54 points or 1.5 percent at 18,083.65 and the S&P 500 is down 93.90 points or 1.6 percent at 5,755.82.

The sell-off on Wall Street comes amid concerns about a global trade war after President Donald Trump’s new tariffs on imports from Canada, Mexico and China took effect.

The White House said Trump is proceeding with implementing previously paused 25 percent tariffs on Canada and Mexico to combat the extraordinary threat to U.S. national security posed by unchecked drug trafficking.

Trump also increased the tariff on Chinese imports to 20 percent from 10 percent, claiming the country has not taken adequate steps to alleviate the illicit drug crisis.

Canada responded by announcing 25 percent retaliatory tariffs on $107 billion worth of U.S. imports, while Mexican President Claudia Sheinbaum said her government has made “contingency plans” to respond to the new tariffs.

China also said it would impose additional tariffs of 10 to 15 percent on several agricultural goods, including soybeans, corn, dairy and beef.

“Investors were desperately hoping that Trump would delay tariffs on Canada, Mexico and China at the eleventh hour, yet the US president has stuck to his guns and brought them into power,” said Russ Mould, investment director at AJ Bell.

“Naturally, the recipients have started to retaliate and that has raised the prospect of a full-blown trade war,” he added. “Investors knew there was a real chance this would happen but quietly hoped it would all go away and simply be Trump having a bark worse than his bite. Not this time around.”

Sector News

Banking stocks are turning in some of the market’s worst performances on the day, with the KBW Bank Index plunging by 5.2 percent to its lowest intraday level in well over two months.

Substantial weakness is also visible among airline stocks, as reflected by the 4.7 percent nosedive by the NYSE Arca Airline Index. The index has plummeted to a four-month intraday low.

Brokerage stocks have also shown a significant move to the downside, dragging the NYSE Arca Broker/Dealer Index down by 4.6 percent.

Steel, oil and retail stocks are also seeing considerable weakness, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan’s Nikkei 225 Index slumped 1.2 percent, while Hong Kong’s Hang Seng Index fell by 0.3 percent.

The major European markets have also shown significant moves to the downside. While the German DAX Index is down by 3.6 percent, the French CAC 40 Index is down by 2.4 percent and the U.K.’s FTSE 100 Index is down by 1.3 percent.

In the bond market, treasuries are extending the upward trend seen over the past couple weeks. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.4 basis points at 4.146 percent.

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