U.S. stocks took their biggest tumble in six weeks Thursday as investors shifted focus from the Federal Reserve to the threat of an escalating trade war with China that has the potential to disrupt global growth.
The benchmark Standard & Poor's 500 index had its biggest slump since early February and the Dow Jones industrial average lost more than 700 points after President Donald Trump ordered tariffs on about $50 billion in Chinese goods. The 10-year Treasury yield slid toward 2.8 percent and the yen advanced as investors sought safe havens. The dollar rebounded.
The S&P 500 fell 2.5 percent, while the Dow dropped 2.9 percent and the Nasdaq composite index slipped 2.4 percent.
“The market doesn’t like trade wars, the market doesn’t like that the Fed is adamant about raising rates,” said Matt Schreiber, president and chief investment strategist at WBI Investments in Red Bank, New Jersey. “Yes, the economy has been pretty strong, the labor market has less slack, but there’s nothing to really get fired up about and try to normalize rates to a level way above where we are.”
The threat that a tit-for-tat trade spat with China will erupt and hamper global growth has investors on edge a day after the Fed sought to reassure markets that it’s in no hurry to raise rates even as it lifted growth projections for the world’s largest economy.
Trump’s first trade action directly aimed at China comes as policy makers including IMF Managing Director Christine Lagarde warn of a global trade conflict that could undermine the broadest world recovery in years.
Stocks were also hit earlier when John Dowd resigned as Trump’s lead attorney countering Special Counsel Robert Mueller’s Russia probe as the inquiry into possible collusion in the 2016 election intensifies.
Facebook Inc. shares helped pace a decline in the tech sector, falling 2.7 percent. This week’s selloff in tech stocks is on pace to be the worst since early February. Other notable decliners Thursday included Accenture Plc and Micron Technology Inc.