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INSTANT VIEW-Wall Street hit hard by escalation of tariff war

NEW YORK, May 13 (Reuters) - Wall Street's main indexes tumbled on Monday after Beijing announced plans to retaliate with higher tariffs on U.S. goods, raising fears that another round of tit-for-tat measures could push the U.S. economy toward recession.

The Dow Jones Industrial Average fell 489.76 points, or 1.89%, to 25,452.61, the S&P 500 lost 55.69 points, or 1.93%, to 2,825.71 and the Nasdaq Composite dropped 209.35 points, or 2.64%, to 7,707.59.

STORY:

COMMENTS: ALEC YOUNG, MANAGING DIRECTOR OF GLOBAL MARKETS RESEARCH, FTSE RUSSELL, NEW YORK

The recent escalation in US-China trade tensions is taking a worsening toll on stocks as rising retaliatory tariffs risk sparking a full-blown trade war. Investors are increasingly worried an anticipated second-half profit rebound may now evaporate as President Trumps threat to tariff the remaining $325 billion in Chinese imports would disproportionately target consumer products like iPhones, thereby posing a greater threat to the consumption-driven US economy.

"On the heels of 2019s historic rally, valuations are no longer depressed, making it harder for equities to shrug off looming macro risks. With the ultimate trade outcome inherently uncertain and difficult to model or predict, investors are selling first and asking questions later. More globally exposed, cyclical industries like technology and industrials are proving most vulnerable.

KRISTINA HOOPER, CHIEF GLOBAL MARKET STRATEGIST, INVESCO, NEW YORK

Its clear that there is a lot of nervousness around the U.S.-China trade negotiations and concern that its really deteriorating pretty significantly and thats impacting all areas of markets.

We also have a pretty significant flight to safety in the form of U.S. Treasuries.

Investors have wanted to believe the best. They have hoped for the best and wanted to believe the best. So they hold onto any small sign of better relations between U.S. and China. The characterization of last weeks negotiations as being, I think the term was 'candid and constructive,' many investors held onto. The idea that China even came to the table after tariffs were applied I think investors saw as a positive sign. But the reality is the Chinese delegation left early. The reality is that while trade talks are expected to resume in Beijing, no date has been set and that should tell us a lot about how strained relations are. And then of course, this morning, China finally retaliated with its own set of tariffs on U.S. goods. So clearly this relationship is deteriorating. Its not what investors had hoped it was on Friday. (Compiled by Alden Bentley)