Coverage: Stock market drops after Trump adds China tariffs

U.S. stocks slumped on Thursday as President Donald Trump’s move to impose tariffs on up to $60 billion of Chinese imports drove fears about the impact on the global economy.

Chuck Mikolajczak of Reuters had the news:

Trump signed a presidential memorandum that will target the Chinese imports only after a consultation period. China will have space to respond, reducing the risk of immediate retaliation from Beijing.

But after equities recovered somewhat from earlier lows, selling pressure resumed on Wall Street heading into the close as investors fretted over the potential scale of U.S tariffs and possible impact on global trade.

“There’s too much negative sentiment right now,” said John Carey, portfolio manager at Amundi Pioneer Asset Management in Boston. “It’s possible that it will be rough sledding for a while. I don’t see anything on the horizon that will reassure people that things are just great.”

Major industrials slumped. Plane maker Boeing Co lost 5.2 percent, Caterpillar Inc dropped 5.7 and 3M Co lost 4.7. The three were among the biggest drags on the Dow Jones Industrial Average. The S&P industrials sector plunged 3.28 percent.

Marley Jay of the Associated Press reported that investors moved money into bonds:

On Thursday they fled stocks and bought bonds, which sent bond prices higher and yields lower. With interest rates falling, banks took some of the worst losses. Technology and industrial companies, basic materials makers and health care companies also fell sharply.

Peter Donisanu, an investment strategy analyst for the Wells Fargo Investment Institute, said the risk of a damaging trade war is still low because the Trump administration is targeting specific goods that aren’t central to China’s economy. That could change if it puts tariffs on products like electronics or appliances imported from China.

“If the Trump administration really wanted to hurt China and start a trade war, then they would go after those larger sectors,” he said. Still, Donisanu said that after last year’s rally, investors are looking for new reasons to feel optimistic about stocks. With trade tensions in focus over the last month, they’ve had trouble finding any.

The S&P 500 index skidded 68.24 points, or 2.5 percent, to 2,643.69. The Dow Jones industrial average sank 724.42 points, or 2.9 percent, to 23,957.89. The Nasdaq composite gave up 178.61 points, or 2.4 percent, to 7,166.68. The Russell 2000 index of smaller-company stocks lost 35.43 points, or 2.2 percent, to 1,543.87.

William Watts of MarketWatch.com reported that investors are also worried about retaliatory moves:

Indeed, the worry for investors might have more to do with concerns about potential retaliation and escalation. China’s government criticized the punitive actions and said it would take “all necessary measures” in response.

“For companies that sell to China, or indeed any country outside the U.S., the effects are likely to be negative — which is why markets are reacting again. Even the best-case results would still be worse, economically, than where we are now,” said Brad McMillan, chief investment officer at Commonwealth Financial Network, in a note.

That doesn’t mean investors should panic, said McMillan and others. Despite the rhetoric, there is time for negotiations.

Beijing has signaled it’s initially preparing retaliatory tariffs against a range of agricultural products, from soybeans to live hogs. That’s aimed at products from farm states that backed Trump in the 2016 presidential election.