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Stocks - Expanding U.S.-China Trade Fight Slams Markets

Investing.com - U.S. stocks suffered their worst one-day losses since early December after a trade war between the United States and China abruptly worsened.

The selloff saw theDow Jones industrials lose nearly 1,000 points intraday before late-day buying kicked in and limited the losses.

Still, the Dow closed down 2.9%. The S&P 500 dropped nearly 3.0% and the Nasdaq Composite index fell about 3.5%. The percentage losses were the worst for the major indexes this year.

All three indexes ended the day down 6% from records set only three weeks ago. Despite the turmoil, the Dow is up 10.3% in 2019, with the S&P 500 up 13.5% and the Nasdaq up 16.4%.

The rout was started when China allowed the yuan to sink in apparent retaliation against U.S. threats to impose new tariffs on Chinese goods imported into the United States. The devaluation pushed USD/CNY above 7 per U.S. dollar. The move makes U.S. goods expensive to buy in China and Chinese goods cheaper to buy in the United States.

In addition, The Xi Jinping administration added more ammunition to the trade fight by ordering state-owned companies to suspend imports of U.S. agricultural products. President Donald Trump complained last week China had reneged on promises to buy more U.S. farm products, especially soybeans.

After a meeting between Chinese and U.S. officials last week didn't go well, Trump ordered the tariffs boost. The Wall Street Journal reported his decision came over objections from his advisors.

China, aggressively asserting a leadership role in global trade matters, has said it won't be bullied.

All 30 Dow stocks were lower, with Apple (NASDAQ:AAPL) the worst performer, down more than 5%. The plunge subtracted about 70 points from the Dow, which was off 767 points.

In addition, only 12 S&P 500 stocks were higher on the day. But every stock in the Nasdaq 100 Index was lower. The index, down 277 points, or 3.6%, tracks big non-financial stocks and has a concentration on tech stocks. The loss reflects the drubbing suffered by Apple; Microsoft (NASDAQ:MSFT), down 3.5%; and Amazon.com (NASDAQ:AMZN), down 3.2. Those accounted for more than a third of the point loss.

The stock market's performance reflects worries not just over the China trade fight, which has been going on for more than a year. It also reflects worries that the global economy is slowing, dragged down by trade skirmishes around the world. Japan and Korea are arguing over sales of semiconductors that Korean companies need to power their products.

The United States and Europe are struggling to negotiate a deal over auto imports.

In addition, the U.S. economy is stubbornly growing at a less-than-3% annual rate, to the frustration of the White House, which touted its big 2017-18 tax bill as guaranteeing faster growth.

The stock slump fueled interest in safety, and interest rates also fell around the world. The 10-year Treasury yield fell to 1.735% from Friday's 1.855%. All of Germany's sovereign debt is yielding negative returns for the first time.

Gold assumed its traditional role as safe haven, rising 1.3% to $1,476.50 in futures trading.

Crude oil fell as well.

New-York traded West Texas Intermediate crude settled down 97 cents, or 1.7%, at $54.69 per barrel.

London-traded Brent crude, the benchmark for oil outside of the U.S., slid $2.05, or 3.3%, to $59.81.

The earnings season may come to the fore on Tuesday. The big report will come after the close when Walt Disney (NYSE:DIS) reports fiscal-third quarter results. Analysts polled by Investing.com expect The Mouse to report $1.72 a share in earnings, down from $1.87 a year ago. Revenue is forecast at $21.5 billion, built on very strong performances from a string of blockbuster movies.

Shares are up 26% this year.

Also reporting Tuesday is Wynn Resorts (NASDAQ:WYNN), the casino operator which has extensive operations in Macau in China. Wynn fell 7.2%, unable to get out of the way of the U.S.-China trade fight.

Winners and Losers in the S&P 500

Tyson Foods (NYSE:TSN), chemical manufacturer Linde (NYSE:LIN) and pharmaceutical company ABIOMED (NASDAQ:ABMD) were among the top S&P 500 stocks on the day.

Nektar Therapeutics (NASDAQ:NKTR), Wynn Resorts and Chinese internet services provider Baidu (NASDAQ:BIDU) were among the S&P 500 laggards on the day.

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