Stocks dive on trade war concerns after Trump's tariffs
U.S. stocks opened sharply lower on Friday after after President Trump announced stiff new tariffs on steel and aluminum imports, raising investor concerns about a trade war.
The Dow Jones industrial average dropped more than 337 points, or 1.4 percent, to 24,271.45 in early trading. That followed a drop of more than 400 points on Thursday that followed Mr. Trump's comments about the tariffs. The S&P 500 and Nasdaq composite indices also each fell more than 1 percent in early trading on Friday.
"Trump's announcement of 25 percent tariffs on U.S. steel imports and 10 percent tariffs on aluminum imports rattled markets" on Thursday, wrote Gregory Daco, head of U.S. economics at Oxford Economics, in a research note.
He added, "The tariffs will significantly raise domestic steel and aluminum prices, benefitting steel producers. However, this will be more than offset by higher input costs for steel consuming sectors – the net impact on the US economy being higher inflation and lower growth."
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!
— Donald J. Trump (@realDonaldTrump) March 2, 2018
The downturn comes after Federal Reserve Chairman Jerome Powell testified before Congress on Thursday and appeared to calm one of the market's main worries: inflation. He said that he does not see inflation in workers' wages "at a point of acceleration." Investors have been nervous about the possibility that the Fed may get more aggressive about raising interest rates to beat down inflation.
"The market theme has shifted in a span of hours from Powell, U.S. data and a possible tweak in the dots to global trade wars," wrote TD Securities' Mark McCormick, head of FX strategy. "It should not come as a shock that Trump is ticking off some of the boxes on his campaign promises but the headlines are coming against a backdrop of the removal of central bank stimulus and the repricing of global rates."
On Thursday, China's Foreign Ministry Spokesperson Hua Chunying said it would "take necessary measures to safeguard its legitimate rights and interests."
"The US' unreasonable and excessive use of trade remedy measures will not help revitalize relevant industries at home," the spokesperson said. "Rather, it will affect its employment and jeopardize the welfare of American consumers."
Big industrial users of steel and aluminum such as Boeing opened with losses. Steelmakers also opened lower after posting sharp gains Thursday.
The retail sector is sinking with the exception of Gap. JC Penney is down 8 pct after reporting weak holiday sales. Gap shares rose 6 percent.
Treasury yields rose, as did gold, on inflation concerns.
-- The Associated Press contributed reporting