Major stock indexes dropped dramatically on Wall Street on Monday, their worst loss of the year, after China countered President Donald Trump’s latest tariff threat by letting its currency weaken to the lowest level in more than 10 years.
Investors fear that the escalating trade war between the two giant economic powers could do lasting damage to the world economy.
They responded Monday by dumping stocks and shoveling money into U.S. government bonds, which are considered ultra-safe. That sent bond yields sharply lower.
The Dow Jones Industrial Average sank 767 points, or 2.9%, to 25,717.
The S&P 500 fell 87 points, or 3%, to 2,844. The Nasdaq fell 278 points, or 3.5%, to 7,726.
Technology companies, which would stand to suffer in a protracted trade war, took the biggest losses. Apple gave up 5.2%.
China let its currency, the yuan, drop to its lowest level against the dollar in more than a decade, a move that Trump railed against as “currency manipulation.” It followed his own tweets last week that threatened tariffs on about $300 billion of Chinese goods, which would extend tariffs across almost all Chinese imports.
The escalations in the trade war between the world’s largest economies are rattling investors already unnerved about a slowing global economy, falling U.S. corporate profits and possibly too-weak inflation.
“The Great China Trade Deal evaporated before our eyes last week and investors should stop hoping it back into existence,” Christopher Smart, head of the Barings Investments Institute, wrote in a report.
Losses were steep and worldwide as the sell-off that began Monday in Asia swept westward through Europe to the Americas. Investors in search of safety herded into U.S. government bonds, which sent yields plunging lower.