Stocks fell broadly on Wall Street Tuesday as markets opened after a long weekend to expanded tariffs between the U.S. and China.
Technology companies led the decline. The sector is particularly sensitive to swings in trade relations with China, and tariffs have the potential to drive up costs for gadget and chipmakers. Apple, which relies on China as a key part of its supply chain, fell one per cent, while chipmaker Nvidia fell 1.5 per cent.
On Sunday, the U.S. started charging a 15 per cent tariff on about $112 billion US of Chinese products. China responded by charging tariffs of 10 per cent and 5 per cent on a list of American goods. U.S. markets were closed on Monday for Labour Day.
Industrial stocks were among those with the biggest declines. Caterpillar, which is seen as an industry bellwether when it comes to the impact of trade, fell 1.8 per cent.
Oil prices fell 3.6 per cent and dragged energy stocks lower. Chevron dipped 1.8 per cent.
Investors fled to safer holdings, including utility stocks, bonds and gold.
Utilities wobbled between small gains and losses, while the price of gold rose 1.5 per cent. Bond prices rose, sending yields lower. The yield on the 10-year Treasury fell to 1.44 per cent from 1.50 per cent late Friday.
Investors pessimistic on trade
The latest escalation in the lingering trade war has been expected since early August, when the U.S. announced plans for the new tariff measures, prompting China to retaliate. The worsening trade situation between the world’s two largest economies dragged the S&P 500 to its second monthly loss of the year in August and dented investors’ confidence in global economic growth.
The U.S. and China are supposed to meet in September to continue trade negotiations, but investors have grown pessimistic that any resolution will be forthcoming in the near future.
The S&P 500 on Tuesday fell one per cent as of 10:05 a.m. ET. The Dow Jones Industrial Average fell 412 points, or 1.6 per cent, from Friday’s close. The Nasdaq fell one per cent.
The S&P/TSX Composite Index was down about 70 points, or 0.43 per cent.
Brexit jitters
European stocks fell broadly and the British pound dropped to its lowest level against the U.S. dollar in 34 years, excluding a brief “flash crash” in 2016 that may have been caused by technical glitches, as the U.K. faces a potentially chaotic exit from the European Union.
Prime Minister Boris Johnson’s office said he would call an early election if his opponents pass legislation that would block his plans to leave the European Union by an Oct. 31 deadline.
Asian markets were mixed.