Published: Fri, September 06, 2019
Economy | By

Dow drops 400 points on new tariffs and global economic troubles

Dow drops 400 points on new tariffs and global economic troubles

The bond market has been reflecting these fears, with long-term bond yields falling below short-term ones, a so-called inversion in the US yield curve that has correctly predicted previous recessions.

Technology companies drove a broad slide in US stocks Tuesday as disappointing economic data and the latest escalation in the trade war between the USA and China put investors in a selling mood.

Manufacturing in the United States has been hurting because of the trade war and a global economic slowdown. Apple, which relies on China as a key part of its supply chain, fell one per cent, while chipmaker Nvidia fell 1.5 per cent.

KEEPING SCORE: The S&P 500 fell 0.8% as of 11:05 a.m.

The S&P 500 fell 18 points, or 0.6%, to 2,908.

The Nasdaq fell 88.72 points, or 1.1%, to 7,874.16.

USA stocks started the day on weak footing as Washington and Beijing kicked off a new round of tariffs over the weekend, worrying investors who see no signs of an early resolution to the long-running trade war, which has rattled markets for months and weighed on world economies.

Industrial stocks were among the biggest decliners. It finished at 26,118, down 285 points, or 1 percent.

In an escalation of their trade war, the United States on Sunday began imposing 15% tariffs on a variety of Chinese goods, and China began imposing new duties on US crude oil. India's Sensex fell 1.6% to 36,731.51.

In its first session since the tariffs took effect, the Dow Jones Industrial Average ended down 1.1 per cent at 26,118.02.

Oil prices fell 3.5%, dragging energy stocks down.

America's manufacturing, as represented by the Institute of Supply Management's index hit its worst point in about 44 months since January 2016, coming in at 49.1.

The energy sector tumbled almost 2% and was the biggest loser among the 11 major S&P sectors, as rising OPEC and Russian crude output drove a 4% slump in oil prices. Any reading below 50 indicates contraction.

August marked the first time in three years that the manufacturing sector shrank. Yields and prices move opposite to each other. Gold prices settled 1.8% higher at $1,545.90 an ounce, and the 10-year US Treasury bond yield dropped to its lowest level since July 2016, according to Refinitiv. More than half of the public comments from companies surveyed by ISM pointed to economic uncertainty as a drag on their businesses. So far, however, the American consumer has kept the economy humming.

The yield on the 10-year Treasury has been hovering near or below that of the 2-year Treasury yield, which on Tuesday dropped to 1.46% from 1.49% late Friday.

Earlier in the day data showed British construction companies last month suffered the sharpest drop in new orders since the financial crisis due to jitters about Brexit.

CURRENCY: The dollar was little-changed at 105.97 yen.

European stocks fell broadly and the British pound dropped to its lowest level against the USA dollar in 34 years, excluding a brief "flash crash" in 2016 that may have been caused by technical glitches, as the United Kingdom faces a potentially chaotic exit from the European Union. Prime Minister Boris Johnson's office said he would call an early election if his opponents pass legislation that would block his plans to leave the European Union by an October 31 deadline.

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