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Stocks - Dow Falls Triple-Digits as Trade Jitters Return to Center Stage

Published 07/02/2018, 09:40 AM
Updated 07/02/2018, 09:40 AM
© Reuters.  Wall Streets head lower as trade concerns dampen buyer sentiment

© Reuters. Wall Streets head lower as trade concerns dampen buyer sentiment

Investing.com - Wall Street opened sharply lower on Monday as concerns about trade conflicts returned to center stage.

At 9:33AM ET (13:33GMT), the Dow Jones fell 188 points, or 0.77%, the S&P 500 lost 19 points, or 0.68%, while the Nasdaq Composite traded down 60 points, or 0.77%.

The European Union has responded to U.S. President Donald Trump’s threats to impose levies on imported vehicles, telling the U.S. Commerce Department that tariffs on cars and car parts were unjustifiable and did not make economic sense.

The EU warned that the U.S. tariffs would actually hurt the American economy by imposing higher costs on U.S. manufacturers and said a 25% tariff would have an initial $13 to $14 billion negative impact on U.S. gross domestic product.

In addition to that negative impact, the EU further warned that it would likely lead to counter-measures by its trading partners on $294 billion of U.S. exports.

Trump said last week that the government was completing its study and suggested the U.S. would take action soon.

The latest European retaliatory threat came as the U.S. prepares to impose $34 billion of tariffs on Chinese exports on Friday. Beijing is expected to respond tit-for-tat.

Additionally, Canadian tariffs on about $13 billion worth of American goods went into effect on Sunday in a response to Trump administration tariffs on steel and aluminum.

In an interview with CNBC on Monday, U.S. Commerce Secretary Wilbur Ross declared that Trump would not change his mind on trade policies even if the stock market continued to decline.

“You can't deal with day-to-day stock market fluctuations," he said, adding that the focus needed to be on what's fundamentally good for the economy.

Outside of trade tensions, investors will keep an eye on Monday’s economic data. The ISM's manufacturing survey for June, as well as a report on construction spending for May will both be released at 10:00AM ET (14:00GMT).

While waiting for the data, the U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, gained 0.65% at 94.84 by 9:34AM ET (13:34GMT). The dollar got a boost from weakness seen in the euro after Germany's interior minister offered to resign amid an escalating row over immigration policy, throwing into doubt the future of Chancellor Angela Merkel’s coalition government.

In company news, Tesla (NASDAQ:TSLA) saw shares jump 5.8% on Monday after it reported a 55% increase in production to 53,339 vehicles during the second quarter. That report came on day after chief executive Elon Musk that 7,000 cars, including the 5,000 Model 3 target, had been produced in seven days.

Meanwhile, oil prices were under pressure after U.S. President Donald Trump surprised traders by announcing an impromptu agreement with Saudi Arabia to add more supply to increasingly tight oil markets.

In an early morning tweet on Saturday, Trump said Saudi Arabia's King Salman had agreed to his request to increase crude production “maybe up to" 2 million barrels to help offset a decline in supply from Iran and Venezuela.

U.S. crude futures fell 0.57% to $73.73 by 9:38AM ET (13:38GMT), while Brent oil slumped 1.49% to $78.05.

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