Dow drops 700 Points

By Anora M. Gaudiano & Barbara Kollmeyer | April 6, 2018 2:58 p.m. ET

Dow drops over 700 points; stocks extend selloff

President Donald Trump threatened to widen tariffs on China.

U.S. stocks fell sharply, extending their decline in afternoon trade Friday as investors continued to fret over a deepening China-U.S. trade fight and fresh concerns about inflation.

The main indexes sold off in early trade following President Donald Trump’s proposal of fresh tariffs against China. The afternoon selling pressure followed Federal Reserve Chairman Jerome Powell’s speech in which he backed a “patient” approach to raising interest rates.

What are main benchmarks doing?

The Dow Jones Industrial Average DJIA, -2.34% fell 715 points, or 2.7%, to 23,799, with all 30 blue-chip companies trading in the red.

The S&P 500 index SPX, -2.19%  dropped 70 points, or 2.7%, to 2,592, with all 11 main sectors trading in negative territory. Industrials and financials stocks were leading losses, down nearly 3%.

Meanwhile the Nasdaq Composite Index COMP, -2.28% declined 182 points, or 2.6%, to 6,892.

All three main indexes are looking at weekly declines between 1% and 2%.

What’s driving markets

Investors fretted over potential trade battles between U.S. and China.

The White House, in a statement released after the market close Thursday, said that Trump asked the U.S. Trade Representative to consider an extra $100 billion in Chinese goods to face tariffs and to identify the products that could be targeted.

China’s commerce ministry responded to the latest tariff threat by saying it will respond with countermeasures if needed.

“The Chinese side will follow suit to the end, not hesitate to pay any price, resolutely counterattack and take new comprehensive measures in response,” the ministry said via its website, citing an unnamed spokesman. The statement added that China “doesn’t want” a trade war, but is not afraid to fight one.”

National Economic Council Director Larry Kudlow, appearing on Bloomberg TV on Friday, said the administration was only considering adding “tariff pressures,” and that he hoped there would be negotiations in the next couple of months.

The afternoon selling pressure followed Powell’s remarks about the state of the economy and continuing the gradual tightening policy.

Investors also digested a weaker-than-expected jobs report that might give the Federal Reserve more time to decide whether to raise interest rates four times instead of scheduled three.

The U.S. economy added just 103,000 new jobs in March to mark the smallest increase since last fall and well below the 170,000 forecast by economists polled by MarketWatch. But the latest report on employment still shows the tightest labor market in nearly two decades.

What are strategists saying?

“Today’s market reaction is a reflection of investor fears that the trade rhetoric will get a lot tougher before any negotiations between the U.S. and China get going,” said Ryan Larson, head of equity trading at RBC Global Asset Management.

Larson said that low liquidity is helping amplify market moves.

“Liquidity condition continue to be scarce at best, and it does not take much to move this market up or down,” Larson said.

“The market is already very jittery about potential trade disputes jeopardizing economic growth, so hearing Powell say that the tightening cycle will continue, was perhaps not what investors wanted to hear today,” said Quincy Krosby, chief market strategist, at Prudential Financial

What stocks are moving?

Shares of Incyte Corp. INCY, +0.75% plunged 19%, and Merck & Co. Inc.’s stockMRK, +0.11% dropped 1.5%, after disappointing results of its melanoma drug.

Salesforce.com Inc. CRM, -0.17%  shares were down 1.2% after the cloud-computing company confirmed late Thursday it will issue $2.5 billion in bonds to help finance its purchase

Nvidia Corp. NVDA, +0.01%  was down nearly 1.6%. Short seller Citron Research on Thursday tweeted that it sees shares falling below $200 soon.

Target Corp. TGT, +0.22% agreed to pay more than $3.7 million to settle a lawsuit over racial bias in screening job applicants. The retailer also said it would overhaul its job-screening guidelines. The stock was virtually unchanged.

Apple Inc. AAPL, +0.10%  shares slipped 1.4%. Court documents revealed Thursday that Chief Executive Tim Cook will be deposed on June 27 in chip maker Qualcomm Inc.’s QCOM, +0.04%  lawsuit against the iPhone maker.

What are other markets doing?

Asian stocks had a mixed day, with the Hong Kong Hang Seng Index HSI, +1.11% rising 1% on bets that the latest Trump tariff threat may not develop into any real issue.

After logging strong advances on Thursday, European stocks SXXP, -0.35%  fell across the board.

Gold futures GCM8, +0.63%  edged higher, up 0.5% to $1,335 an ounce. The ICE U.S. Dollar Index DXY, -0.37%  slipped 0.3% to 90.02 following weaker-than-expected jobs report. Meanwhile oil prices CLK8, -2.53% fell sharply on trade war fears, falling 2% to $62.34 a barrel.

Source: Dow Drops over 700 Points; Stocks Extend Selloff