U.S. Stocks Plunge Anew as Trade Fears Resurface; Dow Drops 800 Points

U.S. stocks fell hard on Tuesday, as investors began to doubt efforts by the United States and China to resolve their bitter trade dispute. Cryptocurrencies stabilized following back-to-back losses, with bitcoin clawing back toward the psychologically significant $4,000 mark.

Wall Street’s Volatile Cycle Continues

All three major U.S. benchmarks were hammered, as the volatile cycle on Wall Street continued. The Dow Jones Industrial Average closed down 799.36 points, or 3.1%, at 25,027.36, marking one of its worst performances of the year. Trade-sensitive companies like Caterpillar Inc. (CAT), Boeing Co (BA) and Apple Inc. (AAPLY) were among the biggest decliners, falling at least 4.4%.

The broader S&P 500 Index fell 3.2% to close at 2,700.06, with ten of 11 primary sectors reporting losses. Financials lost 4.5% as a sector, while industrials plunged 4.4% and information technology lost 4%.

The Nasdaq Composite Index declined 3.8% to 7,158.43, reflecting heavy losses in information technology and communication services.

A measure of implied volatility known as the CBOE VIX rose sharply on Tuesday, signaling renewed turbulence over the next 30 days. The barometer of investor anxiety surged 25% to 20.55, where it was back around the long-term mean.

Risk Sentiment Fades

A litany of issues related to free trade, bond yields and Brexit battered investor sentiment on Tuesday. On Wall Street, the major concern was a lack of progress on free trade after Treasury Secretary Steven Mnuchin and White House economic adviser Larry Kudlow lowered expectations concerning China’s intent to reduce tariffs As Bloomberg reports, the Trump administration has yet to secure a deal with China that would eliminate tariff on U.S. automobiles.

President Trump announced this weekend that Beijing “has agreed to reduce and remove tariffs on cars coming into China from the U.S.” in exchange for guarantees that Washington would not move ahead with a planned duty hike on $200 billion worth of Chinese goods.

The death of former U.S. President George H.W. Bush is also causing markets to reshuffle after the major exchanges confirmed they will be closing Wednesday for a national day of mourning. Congressional testimony by Federal Reserve Chairman Jerome Powell planned for Wednesday has also been cancelled.

Cryptocurrencies Stem Decline

Cryptocurrency prices stabilized Tuesday following back-to-back declines, though underlying bias remained firmly bearish. The combined value of all coins peaked at $131.6 billion, according to CoinMarketCap. The collective market cap plummeted to $123 billion on Tuesday.

Bitcoin staged an early recovery, with prices approaching $4,100. On aggregate, the bitcoin price was back to trading just below $4,000 by the late afternoon.

Bitcoin’s heavy selloff over the past three weeks has engineered a sharp decline in mining difficulty, which should provide some reprieve to miners struggling to keep their operations running. Bitcoin’s mining difficulty has declined by nearly 16% in less than to months, according to Blockchain.com. That’s the second-largest drop in bitcoin’s recorded history.

Binance Coin (BNB) was by far the biggest gainer on Tuesday, rising more than 20% to crack $6. The exchange has turned over nearly $650 million in volume over the past 24 hours, higher than any other virtual currently platform.

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.

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