U.S. Stocks Free-Fall as Trump Urges American Business to Look for “Alternative to China”
The Dow and broader U.S. stock market plunged on Friday, wiping out their gains for the week after President Trump rebuked China’s tariff escalation by urging American businesses to shift their supply chains out of the world’s second-largest economy.
Dow, S&P 500, Nasdaq Plunge
All of Wall Street’s major indexes sold off rapidly in the final session of the week, with the Dow Jones Industrial Average plunging 623.34 points, or 2.4%, to 25,628.90. Twenty-nine of 30 index members finished with losses of 1% or greater.
The broad S&P 500 Index of large-cap stocks declined 2.6% to 2,847.11, with all 11 primary sectors finishing lower. Shares of information technology, industrials and financials companies declined more than 3%.
Plunging tech shares weighed on the Nasdaq Composite Index, which settled down 3% at 7,751.77.
The CBOE Volatility Index, commonly known as the VIX, climbed back above 20 on Friday, where it traded in proximity to its long-term average. The so-called “fear index” peaked at 21.07, gaining more than 25%.
Trump Responds to Chinese Tariffs
President Trump vowed a swift response to Beijing’s retaliatory tariffs on Friday and urged American businesses to look for “an alternative to China.”
“The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA,” Trump tweeted.
Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far….
— Donald J. Trump (@realDonaldTrump) August 23, 2019
Trump launched his Twitter tirade hours after China announced $75 billion in retaliatory tariffs against Washington.
The trade-war, now entering its second year, has put a damper on both economies, as evidenced by the latest batches of Chinese and U.S. industrial data. On Thursday, Markit reported that U.S. manufacturing activity contracted in August for the first time in nearly ten years.
Last week, the Chinese government said industrial production in July grew at its weakest pace since February 2002.
Gold Spikes, Bond Yields Fall
The trade-war dilemma stoked a fresh round of haven buying on Friday, as investors poured into gold and U.S. Treasurys.
Gold for December settlement, the most actively traded futures contract, reached a session high of $1,540.30 a troy ounce on the Comex division of the New York Mercantile Exchange. That was roughly $6 shy of a new six-year high.
The yellow metal closed up $28.30, or 1.9%, at $1,536.80 a troy ounce.
Silver futures also advanced, rising 35 cents, or 2.1%, to $17.53 a troy ounce.
The rush into government bonds pushed Treasury yields sharply lower on Friday. The benchmark 10-year U.S. Treasury yield fell 8 basis points to 1.536%. Earlier this month, the 10-year yield fell below 1.5% for the first time in three years.
Featured image courtesy of Shutterstock. Chart via Yahoo Finance.