Wall Street is no fan of Tariff Man.
The stock market stumbled Friday to its first losing month of 2019, pushed down by President Trump's decision to broadly wield his tariff powers, first against China over trade and then against Mexico over immigration.
During stocks’ monthlong slide, investors wrestled with the impact that the United States’ escalating trade war with China could have on corporate and economic growth. Friday’s losses came after Trump announced plans via Twitter to impose tariffs on Mexico in a bid to compel the nation’s third-biggest trading partner to crack down on migrants attempting to enter the U.S.
The move shocked investors and spurred a broad sell-off that sliced more than 350 points, or 1.4%, from the Dow Jones industrial average, which closed at 24,815.04. The S&P 500 index fell 36.80 points, or 1.3% and is now down 6.6% for May, at 2,752.06. The Nasdaq slid 114.57 points, or 1.5%, to 7,453.15.
Technology, the biggest sector in the S&P 500, plunged 8.9% in May, wiping out $515 billion of market capitalization.
“Clearly the markets were blindsided and completely caught off guard,” said Cliff Hodge, director of investments for Cornerstone Wealth. It was only a month ago that the S&P 500 hit a record high and underlined its claim as the longest bull market for stocks on record, at more than a decade long.
The trade conflicts have clouded the global economic outlook, with many economists now forecasting U.S. growth to weaken in the coming months. That’s likely to weigh on corporate profits this year.
“You had a market that was feeling as though President Trump would want to do a deal so that the economy would not be hurt,” said Tom Martin, senior portfolio manager with Globalt Investments. “And now the behavior is indicating that he will use [tariffs] to accomplish his goals and seems less concerned about the actual economic impact.”
The new tariffs on Mexican goods shocked investors, who were already nervous about a global trade war crimping economic growth. Automakers, many of which import vehicles from Mexico, were hit particularly hard. General Motors slid 4.3% Friday, while Fiat Chrysler dropped 4.8%. Ford Motor lost 2.3%.
Utilities, which have lagged behind the market, fell only 1.3% in May, making them among the month's best performers. Meanwhile, real estate stocks posted a 0.9% gain, the only winners this month.
The yield on the 10-year Treasury note slid to 2.13% from 2.22% late Thursday, its lowest level since the summer of 2017.
Investors have been shifting money into bonds over concerns that economic growth will be crimped by the ongoing trade war and the Federal Reserve will need to cut interest rates later in 2019, less than a year after it had been raising rates to get them closer to normal. Lower bond yields drag down interest rates, making lending less profitable for banks. Citigroup fell 2.3% and Bank of America lost 2.1%.
Energy futures closed broadly lower Friday. Benchmark U.S. crude tumbled 5.5% to settle at $53.50 a barrel. Brent crude oil, the international standard, closed 3.6% lower at $64.49 per barrel.
Gold gained 1.4% to $1,311.10 per ounce and silver added 0.5% to $14.57 per ounce.