Wall St shudders as trade war intensifies

Defense Secretary James Mattis welcomes Chinese Minister of National Defense Gen. Wei Fenghe to the Pentagon

Stocks fell sharply on Monday after China chose to raise tariffs on some USA goods as the ongoing trade war between the world's largest economies intensifies.

The recent run of losses has knocked almost 5% off the S&P 500 since hitting an all-time high on May 1, putting the index on course for the biggest monthly decline since December.

The Dow and S&P 500 suffered their worst days since early January, and the Nasdaq Composite had its biggest single-day loss of the year.

Stocks doing business in China got hit the hardest. The NASDAQ had its worst day so far this year and saw its biggest one-day drop since December 4, 2018. "The U.S. economy remains strong", noted Kevin Miller, CIO at E-Valuator Funds. Investor confidence that the two sides were close to a resolution had helped push the market to its best yearly start in decades. Boeing shares declined 4.9% amid speculation the airplane maker could be singled out by China in the trade war.

Providing critical information for the US trading day.

The broader S&P 500 index fell 69.53 points, or 2.4%, to 2,811.87. Meanwhile, the Russell 2000 of small-cap stocks has declined 5.7% over the past six sessions and re-entered correction territory Monday, down more than 10% from its August record.

Brent and USA crude futures had surged the previous day after top exporter Saudi Arabia said explosive-laden drones launched by a Yemeni-armed movement aligned to Iran had attacked facilities belonging to state oil company Aramco.

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The administration followed through on Friday, increasing tariffs from 10 to 25 percent on $200 billion of Chinese goods. The price of soybeans slid 0.8% to $8.04 a bushel Monday. The falling price has put pressure on USA farmers.

The market had also seemed to shrug off the news that growth in China's industrial output had slowed more than expected, Ms Lee said.

"Such an inversion of the curve has often been accompanied, or followed, by a downturn in the USA economy and stock market", Mr. Higgins said.

Technology stocks took the heaviest losses Monday. Chipmakers Microchip Technology dropped 6.3% and Advanced Micro Devices lost 6.2%.

Bank stocks also fell sharply.

Dow Jones has rebounded after a 617 point drop yesterday. Utilities were the only sector to notch a gain.

"Supply-side disruptions along with simmering US-Iran tensions have supported oil prices however as market fundamentals remain tight for the current term", said Benjamin Lu, commodities analyst at Phillip Futures in Singapore.

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On Tuesday, the yield on the 10-year Treasury rose to 2.41 percent from 2.40 percent late Monday.

Asian markets fell broadly.

The dollar was steady at 109.615 yen, having pulled away from a three-month low of 109.020 plumbed on Monday when trade war worries boosted investor demand for the safe-haven Japanese currency. European indexes were mostly down a bit more than 1%.

Coca-Cola Co's shares rose 0.7% after Morgan Stanley upgraded the stock to "overweight", saying higher growth has not been priced into the stock's valuation.

The energy sector led gains, collectively up 1.56 per cent, with Santos up 2.4 per cent to $7.13, Woodside Petroleum up 1.5 per cent to $36.21 and Origin Energy up 2.5 per cent to $7.44.

Investors have so far made it through the bulk of first quarter corporate earnings reports in decent shape. A day earlier, they were the only winners in the market.

Many market players "downplayed" the significance of the March inversion, he added, believing the Federal Reserve would sit on its hands so as not to derail the economic expansion.

Trump aide Kudlow acknowledges USA consumers pay for tariffs, not China
The president suggested that manufacturers who make goods in China could shift production to other countries to avoid the tariffs. On Friday May 10, 2019 President Donald Trump imposed sanctions on $200 billion (€178 billion) worth of Chinese goods.

Teva, which was specifically mentioned, sank 16.8%.

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