U.S. stocks
finished in the red on Tuesday, albeit off session lows, as investors shed
stocks following President Donald Trump’s late-Monday threat to slap an
additional $400 billion in tariffs on China goods. The announcement represented
the latest escalation in a tit-for-tat dispute between the No. 1 and 2 largest
economies in the world, rattling investors.
What did the main benchmarks do?
The Dow Jones Industrial Average DJIA, -0.80% fell 1.2%, or 287.26
points, to close at 24,700.21, dragged down by sharp losses in trade-sensitive,
industrial stocks Boeing Co. BA, -1.47% Caterpillar Inc. CAT, -2.52% and 3M Co.MMM, -1.29% At its intraday nadir,
the Dow was down by as many as 420 points.
Tuesday’s decline marked the sixth straight drop for the
blue-chip gauge, representing the longest such skid since March 2017, a string
of down days that has erased all of 2018’s gains thus far. The Dow is down
about 0.1% year to date.
The S&P 500 SPX, -0.63% fell 11.18 points, or
0.4%, to 2,762.57. The Nasdaq Composite Index COMP, -0.88% shed 21.44 points to
7,725.59, a drop of 0.3%.
As has recently been the case in “risk off”
sessions, the only groups in positive territory were utilities, up 1.1%,
telecommunications, gaining 1.4%, real estate, with a rise of less than 0.1%,
and consumer staples, 0.5% higher on the session. All of those sectors are
considered defensive groups. Materials and industrials stocks, both of which
have an outsize impact to trade uncertainty, both tumbled by around 2%.
What’s driving markets?
After Beijing’s retaliation against U.S. planned tariffs on $50 billion worth of Chinese
imports, Trump asked U.S. Trade Representative Robert
Lighthizer late Monday to identify $200 billion more in Chinese products that
could be subject to tariffs of 10%. The U.S. president also threatened to find
$200 billion more worth of goods if China tried to retaliate against those
additional tariffs.
A spokesperson from China’s Ministry of Commerce said China
will have no choice but to take comprehensive measures in
response to the U.S.’s trade moves, the state-run Xinhua News Agency reported.
Trump’s trade adviser Peter Navarro said Tuesday that
tariffs against China will be “ultimately bullish” for American businesses, as
the administration tries to bring “structural change.”
Investors have for months been concerned that rising trade
tensions could devolve into a sizable headwind for global growth going forward,
particularly at a time when U.S. gross domestic product is expected to
decelerate—but remain positive—over the coming years.
Asia had a brutal session, with Chinese shares suffering their
worst close in two years. Suppliers to Apple Inc. AAPL, -0.56% took hits after a
report on Monday that the company’s chief executive, Tim Cook, had visited the
White House last month to warn that imposing tariffs on Chinese goods could hurt the
iPhone maker. Apple fell 2.1%.
What are strategists saying?
“This is bad…real bad, unless this is gamesmanship as in
the so called ‘Art of the Deal.’ Either way, U.S. companies are more protected
from market fallout from trade barriers than other developed countries, which
has allowed the U.S. to take charge on these tariffs,” wrote Voya Investment
Management strategists Doug Coté and Karyn Cavanaugh in a research note Tuesday,
referring to the mounting trade tensions.
Which stocks are in focus?
Shares of Netflix
Inc. NFLX, -0.32% finished at a fresh
all-time high up 3.7% and above $400, bucking the downtrend for much of the
broader market as the entertainment-streaming company received a bevy of analyst price-target upgrades.
Snap Inc. SNAP, +3.44% shares lost 5.3%
after an analyst lowered his revenue estimate for the
company in the current quarter and in the years ahead, seeing a slightly lower
daily-active-user count and average ad revenue per user.
Tesla Inc.‘s TSLA, -4.06% stock fell 4.9%.
Chief Executive Officer Elon Musk claimed that an employee attempted to
sabotage the car maker in an email sent to employees Sunday night, according
to a report from CNBC.
Cotiviti Holdings Inc.’s COTV, +0.00% shares jumped
10.3% after Verscend Technologies Inc., a portfolio company of private-equity
firm Veritas Capital, agreed to buy the company for $4.9 billion.
Foundation Medicine Inc. FMI, -0.04% shares surged
nearly 29% after Swiss health care group Roche Holding AG ROG, -0.44% announced a $2.4 billion dealto buy the
remaining shares of the genomic profiling group that it doesn’t already own.
Blue Apron Holdings Inc. APRN, -2.37% shares rose by
2.2%. The meal-kit company named a new chief supply chain officer.
Micron Technology Inc. MU, +0.83% rose by 1.4% a day before it reports its quarterly results.
Which economic reports are in focus?
Housing starts data for May surged to an 11-year high, coming in modestly
above expectations.
What are other markets doing?
European stocks SXXP, -0.90% SXXP, -0.90% ended lower across the board on those
trade tensions. In Asia, the Shanghai Composite SHCOMP, -1.37% closed down 3.8%. The Nikkei 225 index NIK, +0.61% slid 1.8% as
investors sought the perceived safety of the Japanese yen USDJPY, -0.01% which surged
0.7% against the dollar to ¥109.81.
The ICE U.S. Dollar Index DXY, -0.25% was up 0.3% to 95.093,
with gains stemming from a sharp loss for the British pound GBPUSD, +0.0453% which broke below
$1.32.
SXXP, -0.90% Gold futures GCM8, -0.22% fell $1.50, or 0.1%, to
settle at $1,278.60, and the U.S. oil benchmark US:CLN8 finished 1.2% lower at $65.07 a
barrel.
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