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Stocks - Dow Plummets as Trade War Boogeyman Returns to Spook Investors

Stock MarketsDec 04, 2018 04:36PM ET
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© Reuters.

Investing.com - The stock market plunged Tuesday as President Donald Trump fueled trade-war jitters and a slump in longer-term U.S. bond yields wreaked havoc on the bank stocks.

The Dow Jones Industrial Average fell 3.1%. The S&P 500 fell 3.24%, while the Nasdaq Composite fell 3.8%.

Trump unleashed a tweetstorm Tuesday, saying he would "happily sign" a fair trade deal with China, but referred to himself as a "Tariff Man," sending a stark reminder that U.S.-China trade relations remain vulnerable.

Trade-sensitive stocks like industrials wiped gains from a day earlier as investors questioned whether Trump's trade advisors, led by Robert Lighthizer, could achieve anything in the 90-day ceasefire agreed by Trump and China President Xi Jinping over the weekend.

Caterpillar (NYSE:CAT) and Boeing (NYSE:BA), barometers of trade given their large international exposure, ended the day sharply lower.

Financials and tech, meanwhile, led the rout on Wall Street.

Short-dated Treasury rates rose above longer-dated rates, referred to as an inversion of the Treasury yield curve, a signal of a potential economic recession.

Goldman Sachs (NYSE:GS) fell 3.8% and Citigroup (NYSE:C) lost 4.4%.

Inverted yields are seen as headwind for banks, weighing on their net interest margin, the difference between the interest income generated by banks and the amount of interest paid out to their lenders.

The curve between three-year and five-year Treasury notes and between two-year and five-year notes inverted on Monday, the first parts of the Treasury yield curve to invert since the financial crisis, excluding very short-dated debt.

Analysts expect the two-year, 10-year yield curve -- seen as a possible precursor to a recession -- to follow suit. The spread has already narrowed to its lowest in over a decade.

"While interest rate hikes have sent short-dated yields higher, tepid inflation and slowing economic growth expectations have kept longer-dated yields pinned down," said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

"Right now it's a bearish sentiment. As soon as investors digested the information from the discussions, they focused on the uncertainties and lack of details," Ryan Nauman, market strategist at Informa Financial Intelligence in Zephyr Cove, Nevada said.

In tech, Apple (NASDAQ:AAPL) dropped 4.4% as supplier Cirrus Logic (NASDAQ:CRUS) trimmed its revenue outlook. That added to a slew of profit warnings from several Apple suppliers in recent weeks, pointing to signs of weakness in the smartphone market, which also weighed on chip stocks.

Among other FANG stocks, Alphabet (NASDAQ:GOOGL) fell 4.8%, Facebook (NASDAQ:FB) lost 2.2% and Netflix (NASDAQ:NFLX) slumped 5.2%.

In corporate news, FedEx (NYSE:FDX) and UPS (NYSE:UPS) plunged after Morgan Stanley raised concerns that Amazon Air could eat into the revenues of both delivery service companies.

Top S&P 500 Gainers and Losers Today:

AutoZone (NYSE:AZO), Newmont Mining (NYSE:NEM) and Entergy (NYSE:ETR) were among the top S&P 500 gainers for the session.

Advanced Micro Devices (NASDAQ:AMD), United Rentals (NYSE:URI) and E-Trade (NASDAQ:ETFC) were among the worst S&P 500 performers of the session.

-- Reuters contributed to this report.

Stocks - Dow Plummets as Trade War Boogeyman Returns to Spook Investors
 

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Swiggsy McZiggsy
Swiggsy McZiggsy Dec 05, 2018 3:46AM ET
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Just another one of his muscle flexes. The man is so insecure and basically wants people to believe he's running the show. US and CN is still wanting to come to a resolution and its apparent China has somewhat buckled and given in a tad. Unsuccessful negotiations will mean Trump Will be out of the Office in next elections..Soon there will be more 'Good talks' occurring. BTD imo.
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Tom OKray
Tom OKray Dec 04, 2018 6:11PM ET
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The dip aint over as long a Trump is in charge.
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nikitatretyak .
nikitatretyak . Dec 04, 2018 4:21PM ET
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By the dip
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Ryan DeSousa
Ryan DeSousa Dec 04, 2018 4:21PM ET
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sell the rip
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patrick thrower
patrick thrower Dec 04, 2018 4:21PM ET
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snip, dip and a rip is what I say when cutting clones for my MJ garden
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