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Wall Street sinks as yuan slide intensifies trade angst, Dow loses 700 points

Published 08/05/2019, 07:37 PM
Updated 08/05/2019, 07:37 PM
© Reuters. Traders work on the floor at the NYSE in New York

By April Joyner

NEW YORK (Reuters) - Wall Street slumped on Monday and futures pointed to more losses to come after a fall in China's yuan currency and U.S. President Donald Trump's vow to impose additional tariffs on Chinese goods sparked an escalation of the U.S.-China trade war.

S&P 500 futures late in the day dropped over 1% after the United States officially designated China a currency manipulator, sharply escalating the ongoing dispute between the world's two largest economies.

U.S. Treasury Secretary Steven Mnuchin said in a statement that Washington will engage with the International Monetary Fund to eliminate unfair competition from Beijing.

During Monday's session, the benchmark S&P 500 slid about 3% to mark its biggest one-day percentage decline since Dec. 4. That slump amounted to a $766 billion loss on paper for the index, according to Refinitiv data.

The S&P 500 has fallen for six consecutive sessions and is now about 6% below its record closing high on July 26.

The drop in S&P 500 futures late on Monday suggests investors expect Wall Street to open with more losses on Tuesday.

The yuan weakened past the key seven-per-dollar level to its lowest level in 11 years, after the People's Bank of China, with the blessing of policymakers in Beijing, set its daily midpoint at the weakest level in eight months.

Trump on Monday called the weakening of the yuan a "major violation," and "currency manipulation" on Twitter.

Several investors viewed the move in the Chinese currency as a direct response to Trump's announcement of 10% tariffs on an additional $300 billion of imports from China.

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"It's the escalation of the trade war," said Steven DeSanctis, equity strategist at Jefferies in New York. "The dollar strengthening presents another issue. For companies that do a lot of business outside the U.S., it all adds up."

A weaker yuan and a stronger dollar pose challenges for U.S. companies that do substantial business in China by effectively raising the cost of their goods for Chinese customers.

Adding to the tensions, China's Commerce Ministry said Chinese companies have stopped buying U.S. agricultural products and that Beijing will not rule out imposing import tariffs on U.S. farm products that were bought after Aug. 3.

Shares of S&P 500 technology companies (SPLRCT), which are heavily exposed to Chinese markets, dropped 4.1%.

Apple Inc (O:AAPL) shares slid 5.2% as analysts warned that the newly proposed tariffs may hurt demand for the iPhone, while the Philadelphia semiconductor index (SOX) dropped 4.4%.

Stocks could slide further if there are no signs of improvement in U.S.-China trade relations before September, when the recently announced tariffs are to take effect, said Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta.

"There's a little bit of a vacuum in the market for the next several weeks," he said. "We're in this corrective phase, and it likely has further to go."

The Dow Jones Industrial Average (DJI) fell 767.27 points, or 2.9%, to 25,717.74, the S&P 500 (SPX) lost 87.31 points, or 2.98%, to 2,844.74 and the Nasdaq Composite (IXIC) dropped 278.03 points, or 3.47%, to 7,726.04.

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The Cboe Volatility Index, or VIX (VIX), an options-based gauge of investor anxiety, rose 6.98 points to 24.59, its highest in about seven months.

No. 1 U.S. meat processor Tyson Foods Inc (N:TSN) provided a bright spot as its shares rose 5.1% after the company beat quarterly profit estimates.

Declining issues outnumbered advancing ones on the NYSE by a 6.36-to-1 ratio; on Nasdaq, a 6.46-to-1 ratio favored decliners.

The S&P 500 posted three new 52-week highs and 32 new lows; the Nasdaq Composite recorded 13 new highs and 280 new lows.

Volume on U.S. exchanges was 9.41 billion shares, compared with the 6.8 billion average for the full session over the last 20 trading days.

Latest comments

Ok this dialog became a political tribune with no sense at all.
Too many American cowards on this board, 30 years ago, US was perfectly fine without China, Americans shot their own foot by allowing China to join WTO and fed it into a monstor it is now with all American technology and American capitalism. Now we can continue to cave in by scaring ourselves to death with China news. Yuan depreciated less than 5% since the announcement of tariff, eventually cancelling out the tariff, if it continues, China is going to experience capital flight, not us
The only person scared of China news seems to be you. The markets react to tarrifs against China because American Capitalists want to buy and build their products cheap, so they went to a market that would satisfy their demands for cheap labor. And now if China is hit with tarrifs the stock market suffers because thats where goods are made. If America didnt want this problem then American Capitalists should have decided to pay their workers the wages demanded of them. Since they decided not to, they moved to a place with high manyfacture ability and low wages, just as Captilism dictates. Anyone who says what is happening now is anti-Capitalist simply does not understand what that monetary system dictates. American companies moving to China so they can pay their workers less is exactly what Capitalism dictates is best. China profiting from that is also peak Capitalism. If America doesnt want China to profit then it needs to become the better choice for manufacturing. Until then,
Until then, capitalism dictates that China will be the market where goods are produced because America cant/wont compete with China in this. American companies cant get away with paying their workers a low wage with little benefits, and there is no incentive for them to make products in America when they would net a smaller margin because of the cost of labor.
30 years ago the US imported everything from Japan. Now it's China. The US has screwed itself into the ground for profit for longer than you've been alive.
Trump and his cabinet and you guys don't know nothing about Chinese Communist party
Yes we do. You guys are currency manipulators.
Can US lower dollar to counter this?
Lower it to what? It is the back up currency of the world. it's a sure way to make the world go crazy. it would be like a dog chasing it's own tail. everything else would fall with it.
With bond yields moving lower.....time for SP 500 to cut dividends ? The MARKET seems to say that.
Short the companies that have large China exposure, their years of profit made in China are all phantom profits now, a lesson to their greed for underestimating China’s political risk
I've been all cash (about 200k) since may.
I think you are talking about the S&P500 and all global risk assets. you are underestimating the exposure to China.
That includes US Treasuries. Wont be long before China dumps them...
After Today's market action....RELEVANT to The 300 Spartans.
Like a hot knife cutting a cheese cake. Will Cramer say ' CLOSE TO A BUYING SIGNAL ?
Once the bond yields drop below 0, it's gold/silver/crypto time!
US needs China goods more than China needs US goods, so US will be the big loser here. Trump thinks he can still threaten China. Just wait till China raise import tax on Soybeans... With all the debt that US has, I think they (President Trump) should show some respect and be humble instead of being arrogant.
China needs foreign capital to pop up their realestate bubble more than US need their goods
I'll bet half the stuff in your trailer is made in China.
and dont forget the trailer...
Dow's New Day Low..... Hmmmm..
"When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!". . 02:50 - 2. März 2018
Did TRUMP say.......Toledo instead of Dayton ?
Sure it was a teleprompter issue as he has a huge brain.
Thanks !!
China has an emerging consumption society, while US consumers are facing debits
Their consumption is based on continued ripoff of American technology
Go to Taobao and take a look of all the products there, the majority are replicas of western products
I wrote k i l l in g the trade, c'mon fix the AI word list. Please.
Pride is ****the international trade and will have serious consequences with long range effects. Hopefully among others could be a change in next election for moderate tone to end this tweet spontaneous outrage policy in US.
The news people have been talking about a coming market correction for months. Maybe this is it.
long overdue. market went up based on vacuum.
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