U.S. Stocks Plunge on China’s Trade-War Escalation
Stocks experience huge selloff after China lets yuan slip to 11-year low.
The U.S. stock market plunged anew on Monday, with the S&P 500 extending its slide to six days after China let its yuan currency slide against the dollar.
All of Wall Street’s major indices finished lower. The broad S&P 500 Index (NYSEARCA:SPY) crashed 3% to 2,844.75. All 11 primary sectors recorded losses, with information technology falling 4%. Eight other sectors fell by at least 2%.
The Dow Jones Industrial Average (NYSEARCA:DIA) plunged 767.27 points, or 2.8%, to 25,717.74.
Meanwhile, the technology-focused Nasdaq Composite Index (NYSEARCA:QQQ) fell 3.5% to 7,726.04.
A measure of implied volatility known as the CBOE VIX (NYSEARCA:VXX) surged by as much as 105.5% on Monday and peaked at 36.20. The so-called “fear index” would eventually settle up 30% at 23.06 on a scale of 1-100 where 20-25 represents the historic average.
The market meltdown began in Asia Monday after China let its yuan currency slide as much as 1.9% against the dollar, reaching a new record offshore low of 7.1087, according to The Wall Street Journal.
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Hours later, President Trump accused China of “currency manipulation” and vowed to continue fighting its “unfair trade practices.”
“Based on the historic currency manipulation by China, it is now even more obvious to everyone that Americans are not paying for the Tariffs – they are being paid for compliments of China, and the U.S. is taking in tens of Billions of Dollars!” Trump tweeted. “China has always….used currency manipulation to steal our businesses and factories, hurt our jobs, depress our workers’ wages and harm our farmers’ prices. Not anymore!”
The Final Word: By lowering the yuan, the People’s Bank of China has effectively weaponized its exchange rate. This is a clear indication that the ongoing trade war is only getting started.