Get 40% Off
👀 👁 🧿 All eyes on Biogen, up +4,56% after posting earnings. Our AI picked it in March 2024.
Which stocks will surge next?
Unlock AI-picked Stocks

Stocks - Dow Plunges as Trump Reignites Trade War Fears, Yield Curve Weighs

Published 12/04/2018, 01:04 PM
Updated 12/04/2018, 01:08 PM
© Reuters.

Investing.com –The Dow slumped sharply Tuesday after President Trump signalled a willingness to revive the trade war with China should trade talks fail.

The Dow Jones Industrial Average fell 2.25%, while the S&P 500 sank 2.4%.

The NASDAQ Composite fell 2.7% after techs joined the early selloff around midday, pushing the entire market even lower.

Trump said in a series of tweets Tuesday that a deal between the two countries would get done if possible. But the president referred to himself as a "Tariff Man," hinting that he was prepared to re-escalate tensions with China.

Financials, meanwhile, led the rout on Wall Street as a continued inversion on parts of the Treasury yield curve weighed on banks.

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.

Goldman Sachs (NYSE:GS) fell 3% and Citigroup (NYSE:C) plunged 5%.

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.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

"It's a signal we're getting closer to (full) inversion but we're still a fair distance from it. It's something to note ... something to be aware of but there're other facts in play."

"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 3.7% as supplier Cirrus Logic (NASDAQ:CRUS) trimmed its revenue outlook, adding to growing evidence of tepid iPhones sales.

-- Reuters contributed to this report.

Latest comments

Trump is just a drama President, he came to make all mkt uncertain, why ppl elected a businessman I cant understand, he is more businessman than a Gov minister
G20 only pumped up the dow for 300 points . and trump just proved he is more powerful than G50
profit taking what else is new
Trump is saiyng great words for short traders! Embrace the bear market!
Trump is threatening to cancel the tariff truce that China never agreed to!!
This is getting crazy. Clearly, potus makes a lot of money out of his declarations. Many peoples must trade for him currently. He knows that the market is complely stupid.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.