Dow drops 270 points on trade war fears, uncertainty about Fed’s next move

Stocks fell on Friday as President Donald Trump stoked U.S.-China trade fears with the announcement of more tariffs while investors digested U.S. employment data.

The Dow Jones Industrial Average traded 270 points lower. The S&P 500 lost 1.2% while the Nasdaq Composite slid 1.7%. The major indexes also broke below their 50-day moving averages, a key technical level watched by investors.

The indexes were on pace to post their worst weekly losses of the year. They were all down more than 3% week to date.

In a series of tweets on Thursday, President Donald Trump said the 10% charge would be imposed on $300 billion worth of Chinese goods. The levy will take effect starting September 1. Trump said later on Thursday he was open to shelving that tariff if China stepped up its U.S. agricultural purchases.

The move breaks a truce in the long-running trade war between the world’s two largest economies, with investors fearful it could further disrupt global supply chains.

China’s foreign ministry pushed back against Trump’s latest tariff threat on Friday morning, reportedly saying the world’s largest economy should give up its illusions, shoulder some responsibility and come back to the right track on resolving the trade war.

China’s spokesperson at the foreign ministry, Hua Chunying, said at a daily press briefing that Beijing would have to take countermeasures if the U.S. was committed to putting more tariffs on Chinese goods, Reuters reported.

Trump’s tariff threat came as a surprise to financial markets in the previous session, in large part because negotiators for the two sides had just met earlier this week in China.

Trump is also scheduled to make a trade announcement on the European Union later on Friday.

Jobs growth in line with estimates, wages rise more than expected
The U.S. economy added 164,000 jobs in July, just below a Dow Jones estimate of 165,000. The job gains pushed the size of the U.S. labor force to a record high.

Wages topped analyst expectations. They rose 3.2% on a year-over-year basis, surpassing a Dow Jones forecast by 0.1 percentage points.

The strong wage number could be seen by traders as a sign of rising inflation, which could keep the Federal Reserve from cutting rates multiple times later this year. The Fed cut interest rates by 25 basis points on Wednesday.

“The in-line July jobs report doesn’t really change the macro outlook much. But equities have other problems,” said Alec Young, managing director of global market research at FTSE Russell. “They’re being squeezed by a double whammy. On the one hand, Wednesday’s Fed outlook was less dovish than hoped, while President Trump’s latest consumer-focused China tariffs significantly dented the already soft global growth outlook.”

CNBC

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya