Dow in Full Meltdown Mode as Jeffrey Gundlach Says Trump Tariff Escalation Likely

The Dow and broader U.S. stock market crashed on Tuesday, as investors continued to weigh President Trump’s new tariff threat against China. Bond king Jeffrey Gundlach told CNBC that the chances of a tariff escalation are high and that the New York Stock Exchange is already in a bear market.

Stock Selloff Resumes

Wall Street’s major indexes plunged on Tuesday and suffered their worst single-day decline since January. After falling as much as 649 points, the Dow Jones Industrial Average closed down 473.39 points, or 1.8%, to 25,965.09.

The broad S&P 500 Index of large-cap stocks declined 1.7% to close at 2,884.05. All 11 primary sectors finished in negative territory, with information technology falling 2.1%, Industrials, materials and health care also declined by at least 1.7%.

A tech-sector selloff dragged the Nasdaq Composite Index sharply lower. The index closed down 2% at 7,963.76

Markets experienced a similar meltdown on Monday but managed to pare most of their losses by the end of trading.

The CBOE Volatility Index, commonly known as the VIX, surged on Tuesday to its highest level since January. The so-called “fear index” rose more than 33% to 20.63 on a scale of 1-100 where 20-25 represents the historic average. VIX climbed by as much as 46% during the previous session.

Gundlach’s Ominous Warning

Jeffrey Gundlach, the so-called bond king who runs the $130 billion DoubleLine asset management group, told CNBC on Tuesday that President Trump’s tariff escalation against China will likely become a reality very soon.

In an interview with CNBC’s Halftime Report, Gundlach said the chance of 25% tariffs on $325 billion worth of Chinese goods “is better than 50%” because “both the premier of China and the president of the United States want to come across that they prevailed and didn’t give in.”

Trump unleashed a Twitter tirade on Sunday where he threatened to impose higher import duties on all Chinese goods destined for U.S. shores. The tariff escalation came after one of Trump’s top trade advisers warned him that China was backtracking on its trade deal.

Despite the four-month rally in stock prices, Gundlach says we are already in a bear market because the NYSE composite index “has fallen over 20% and has failed to return to its high.”

Bitcoin Approaches $6,000

Bitcoin’s market capitalization swelled to around $105 billion on Tuesday after an overnight rally pushed prices to new yearly highs.

The BTC price peaked at $5,982.39, according to CoinMarketCap. The digital currency was last seen trading at $5,902.27, having gained 2.2% over the last 24 hours. Read more: Bitcoin Approaches $6,000 Following Overnight Surge; Will the Rally Continue?

The broader cryptocurrency market has been unable to keep up with bitcoin’s torrid gains in recent weeks. As such, bitcoin’s dominance rate has swelled to 56.1%, the highest since September.

All of the large cap coins traded slightly lower in the afternoon session.
Ethereum (ETH) was down 1.6% at $171.59. XRP was just barely trading above $0.3000 after falling 1%. Bitcoin cash (BCH) gave up 1.9% to trade at $286.74.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. Charts via Stockcharts.com and CoinMarketCap.com.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi