Trump’s trade war with China rattles U.S. stocks.
U.S. stocks finished deep in the red on Wednesday, with the Dow and S&P 500 snapping four-day winning streaks after the Trump administration unveiled new levies targeting Chinese imports.
Dow industrials (NYSEARCA:DIA) shed 219.21 points or 0.9%, to close at 24,700.45.
The broader S&P 500 Index (NYSEARCA:SPY) closed down 0.7% at 2,774.02, with ten of 11 primary sectors falling. Sectors tied to primary industry were the heaviest hit, with energy and materials falling the hardest.
The technology-driven Nasdaq Composite Index (NYSEARCA:QQQ) fell 0.6% to close at 7,716.61.
A measure of implied volatility known as the CBOE VIX (NYSEARCA:VXX) recorded its first gain in five sessions. The so-called “fear index” rose more than 6% to 13.42.
The Trump administration has announced plans to implement additional levies on up to $200 billion in Chinese imports, setting the stage for a prolonged trade war with the world’s second largest economy. Chinese officials have vowed to retaliate to the new measures, though details remain scant at this point.
Last week, Washington implemented a levy of 25% on $34 billion in Chinese goods.
In economic data, U.S. producer prices rose faster than expected in June, a sign that inflationary pressures are building. The producer price index (PPI) rose 0.3% compared with May and 3.4% annually, the Labor Department reported Wednesday. Analysts in a median estimate called for yearly growth of 3.2%.
The Final Word: Trade war risks loom large for investors. While China has vowed to implement countermeasures, the country’s burgeoning surplus with the U.S. will leave it unable to match Washington’s levies dollar for dollar.