Thursday August 2nd

2-08-2018

Dow drops more than 150 points after Trump threatens China with bigger tariffs

Stocks fell sharply on Thursday as trade worries intensified once again after the Trump administration threatened to slap bigger tariffs on China. The Dow Jones Industrial Average dropped 180 points, with Boeing and DowDuPont lagging. The S&P 500 declined 0.6 percent as materials and tech underperformed. The Nasdaq composite also slipped 0.6 percent. The U.S. administration announced on Wednesday that President Donald Trump asked U.S. Trade Representative Robert Lighthizer to consider increasing the proposed levies on $200 billion worth of Chinese goods up to 25 percent, from 10 percent. China's Ministry of Commerce responded to the U.S. announcement saying: "China is fully prepared and will have to retaliate to defend the nation's dignity and the interests of the people, defend free trade and the multilateral system, and defend the common interests of all countries." Shares of big exporters Caterpillar and Boeing both fell more than 1 percent in the premarket. Global stock markets also fell. The Shanghai Composite and Nikkei 225 dropped 2 percent and 1.03 percent, respectively. In Europe, the Stoxx 600 index fell nearly 1 percent. "Investors are flirting with a combination of bad news," said Peter Cardillo, chief market economist at Spartan Capital Securities. "President Trump doesn't appear to be backing down and the Chinese have threatened to retaliate." Earnings season continued on Thursday with DowDuPont and Aetna reporting better-than-expected quarterly results. Aetna's shares were flat, but DowDuPont's stock fell more than 1 percent. Tesla shares surged more than 10 percent in the premarket after CEO Elon Musk said the company would be profitable in the second half. However, Tesla posted a wider-than-expected loss for the previous quarter. More than 70 percent of S&P 500 companies have reported quarterly results through Thursday morning, with 78 percent reporting better-than-expected profits, FactSet data shows. "Generally earnings themselves have been robust, but appear to have been fully discounted in most cases by the market," said Michael Shaoul, chairman and CEO of Marketfield Asset Management. "In a few high profile cases earnings disappointed, triggering very sharp losses in equity prices, again reflecting high levels of positioning." The Labor Department said weekly jobless claims rose to 218,000. Economists polled by Reuters expected an increase to 220,000. The report comes after the Federal Reserve kept interest rates unchanged, but upgraded its outlook on the U.S. economy to strong. It also comes ahead of the Labor Department's monthly jobs reports, scheduled for release Friday. Oil prices fell for a third day on Thursday, following a surprise increase in U.S. crude inventories that added to existing concern about rising global crude supply. Saudi Arabia, Russia, Kuwait and the United Arab Emirates have increased production to help compensate for an anticipated shortfall in Iranian crude supplies once U.S. sanctions come into force later this year. Brent crude futures were last down 42 cents at $71.97 a barrel by 8:36 a.m. ET, after dropping 2.5 percent on Wednesday. U.S. crude futures fell 45 cents to $67.21. They fell 1.6 percent in the previous session. Gold prices held steady on Thursday after an upbeat assessment of the U.S. economy by the Federal Reserve and new trade tensions between Washington and Beijing boosted the dollar and U.S. bond yields. Gold has slumped 11 percent since April to its lowest in a year as rising U.S. interest rates and the perception that trade wars will damage the United States less than other nations pushed the dollar higher. The stronger dollar hurts gold because it makes bullion more expensive for buyers with other currencies. Higher bond yields meanwhile make non-yielding gold less attractive to investors. "It looks like gold doesn't want to go lower at the moment," said ABN AMRO analyst Georgette Boele. "We are in territory - $1,200-$1,220 an ounce - where we should start to bottom out." Spot gold was flat at $1,215.46 an ounce, near a one-year low of $1,211 from July 19, with the dollar 0.4 percent higher against a basket of currencies. U.S. gold futures were down 0.3 percent at $1,224.2 an ounce.