Big industrial and technology companies’ stocks skidded Tuesday as the trade dispute between the United States and China threatened to come to a boil. Smaller companies less focused on overseas trade fared better, as did stocks that pay dividends.
The Dow Jones industrial average slid 287.26 points, or 1.1%, to 24,700.21. Tuesday was the index’s sixth drop in a row. The Standard & Poor’s 500 index fell 11.18 points, or 0.4%, to 2,762.57. The Nasdaq composite fell 21.44 points, or 0.3%, to 7,725.59.
International markets suffered steeper losses. Hong Kong’s Hang Seng index sank 2.8%, its biggest decline since February, and Germany’s DAX lost 1.2%.
Oil and copper fell. Both are commodities that would be susceptible if a trade dispute caused a slowdown in global economic growth. Cautious investors moved money into bonds.
President Trump told the U.S. trade representative to identify $200 billion in goods for a potential 10% tax, and China said it would respond with duties of its own. In a statement, Trump said that if China retaliated, he would order yet another $200 billion in tariffs. China doesn’t import enough goods from the United States to match the scale of Trump’s proposals, but it could sanction U.S. products or companies through other means.
Days ago, the U.S. and China each announced 25% taxes on $50 billion in imports from the other. Although the dollar amounts are rising rapidly, the countries still have time to negotiate, as the previously announced tariffs won’t take effect until July 6.
Stocks dived early in the day; the Dow was down as much as 419 points.
Smaller and more domestically focused companies recovered and finished with small gains, and big-dividend companies such as consumer products firms rose too. The Russell 2000 index edged up 0.99 of a point, or 0.1%, to a record 1,693.45. That index is up 10.3% this year; the S&P 500 has risen 3.3%, and the Dow has taken a small loss.
Kate Warne, investment strategist for Edward Jones, said investors are concerned about what they’re seeing but still think the U.S. and China will work out their differences.
“There’s concern, but there’s not overall great worry at this stage,” she said. “We are certainly taking the first steps toward a trade war, and the more tit-for-tat actions are taken, the harder it is to pull back.”
Industrial and technology companies took some of the biggest losses as investors worried that the dispute could grow more intense and drag down global economic growth. The dollar also got stronger, and the ICE-US Dollar Index hit its highest level since July. That makes U.S. goods more expensive in other markets.
Aerospace company Boeing dropped 3.8% to $341.12, and construction and mining equipment maker Caterpillar slid 3.6% to $143.30. Apple fell 1.6% to $185.69. Companies that make cars, steel and aluminum and chemicals also took heavy losses.
So did shares of Chinese companies listed in the United States. E-commerce company Alibaba slid 2% to $204.43. Search engine firm Baidu declined 2.5% to $262.11.
The euro sank to $1.1575 from $1.1615. The dollar fell to 110.07 yen from 110.44 yen.
Bond prices climbed as investors turned more cautious. The yield on the 10-year Treasury note fell to 2.89% from 2.92%. The yield on the 10-year note is just 0.35 of a percentage point higher than the yield on the two-year, the smallest it’s been since summer 2007. For economists, the gap starts flashing a warning signal when short-term Treasurys are yielding more than their long-term counterparts. That’s a scenario called an inverted yield curve, and it has preceded each of the last seven recessions.
Shares of Chinese telecom giant ZTE dived 24.8% in Hong Kong after the U.S. Senate sought to restore a ban that prevents the company from buying U.S. components for seven years. The Senate’s move would block a White House plan to stop the ban in exchange for a big fine and other penalties.
U.S. companies that supply ZTE also sank. Acacia Communications fell 3.7% to $33.94.
Healthcare companies rose. CVS Health jumped 4.5% to $70.77 after the drugstore chain and pharmacy benefits manager said it will start making home deliveries of prescriptions and other items.
As the dollar gained strength and investors worried about economic growth, oil prices turned lower. U.S. crude fell 1.2% to $65.07 a barrel in New York. Brent crude, the international standard for oil prices, fell 0.3% to $75.08 a barrel in London.
In other energy trading, wholesale gasoline shed 0.8% to $2.04 a gallon. Heating oil fell 0.5% to $2.12 a gallon. Natural gas fell 1.7% to $2.90 per 1,000 cubic feet.
Gold fell 0.1% to $1,278.60 an ounce. Silver fell 0.7% to $16.32 an ounce. Copper sank 1.9% to $3.05 a pound.
In Europe, the CAC 40 of France fell 1.1%, and in London the FTSE 100 fell 0.4%. The losses were heavier in Asia: Tokyo’s Nikkei 225 retreated 1.8%, and Seoul’s Kospi sank 1.5%.
2:10 p.m.: This article was updated with closing prices, context and analyst comment.
1:40 p.m.: This article was updated with the close of markets.
This article was originally published at 6:45 a.m.