Benchmarks closed sharply lower on Friday following President Trump’s comments that the U.S. companies should immediately make their products at home. His comments came in after China unveiled retaliatory tariffs on $75 billion of U.S. goods. Investors, by the way, were pleased with Powell’s Jackson Hole remarks, that the Fed will “act as appropriate” to keep economic growth afloat.
The Dow Jones Industrial Average (DJI) fell 2.4% to close at 25,628.9. The S&P 500 lost 2.6% to close at 2,847.11. The Nasdaq Composite Index closed at 7,751.77, dropping 3%. The fear-gauge CBOE Volatility Index (VIX) increased 3.2% to close at 19.87.
A total of 8.07 billion shares were traded on Friday, lower than last 20-session average of 7.58 billion. Decliners outnumbered advancers on the NYSE by a 4.52-to-1 ratio. On Nasdaq, a 5.27-to-1 ratio favored declining issues.
How Did The Benchmarks Perform?
The Dow closed in negative territory as the long-running tariff war intensified and investors sell off shares of companies with higher exposure to China. Shares of trade-sensitive chipmakers dropped, with the Philadelphia SE Semiconductor index falling 3.9%.
All 11 major sectors of the S&P 500 closed in negative territory. The tech, energy, consumer discretionary, industrials and communications services, notably, went down 2% and further. The Nasdaq Composite also ended in the red due to poor performance from large-cap tech stocks.
Trump’s Tweet Dips Wall Street
A series of angry tweets from President Donald Trump made investors panic and sell off shares. Initially, as the news of China enforcing additional tariffs came in, Trump tweeted that American companies are “herby ordered” to look for alternatives to Chinese products. He accused China of stealing dollars and patents over the years.
Trump tweeted that the U.S. would now raise existing tariffs on $250 billion worth of Chinese imports from 25% to 30%. Additionally, from Sept 1, the U.S. plans to introduce 15% tariffs instead of a 10% planned on the remaining $300 billion of goods from China.
As soon as Trump’s tweets came in stocks sank. Tech stocks felt the strongest blow, with Apple Inc. AAPL shares dropping 4.6% and NVIDIA Corporation NVDA and Broadcom Inc. AVGO falling 5.3% and 5.4%, respectively.Intel Corporation INTC shares dropped 3.9%.
China’s Retaliatory Tariffs
The Chinese state council on Friday reported that due to the tariffs imposed by the U.S., China has been forced to take “countermeasures”. China unveiled plans to impose tariffs ranging from 5% to 10% on $75 billion of American goods in 2 batches from Sept 1 and Dec 15.
China also clarified that a 25% tariff will be imposed on U.S. automobiles and 5% on auto parts and components. China also mentioned that all tariffs will be imposed instantly after U.S. imposes the tariffs.
Powell Soothes Investors
US stocks swayed on Friday morning as investors were patiently wait for the much-anticipated speech from the Federal Reserve Chairman Jerome Powell at the central banker’s symposium in Jackson Hole, Wyoming. Powell said that the Fed is "carefully watching developments" in the economy and will "act as appropriate," but did not promise any specific rate easing measures immediately.
Powell’s remarks were based on China preparing to launch fresh tariffs from Sept 1 and Dec 15, signs of global economic slowdown and tension building up in Brexit and Hong Kong’s call for higher democracy.
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