Stocks slumped Thursday and bond prices soared after President Trump surprised markets with a new 10% tariff on $300 billion worth of goods from China beginning next month.
The news erased a broad rally on Wall Street, leading to the market’s fourth straight loss. Bond prices surged, sending yields sharply lower, as investors sought safety.
The price of U.S. crude oil skidded nearly 8%, its biggest drop in more than four years and a signal that investors fear the economy could slow down.
Investors were taken off guard by the tariff announcement because the White House had said a day earlier that Beijing had promised to buy more farm goods. That came just as the latest round of trade talks were ending.
Companies that rely heavily on doing business with China took the brunt of the selling Thursday. Electronics retailer Best Buy went from a slight gain to a drop of 10.8% in heavy trading. Apple went from a gain of 1.4% to a loss of 2.2%.
The Standard & Poor’s 500 index dropped 26.82 points, or 0.9%, to 2,953.56. The index has fallen for four straight days since setting an all-time high Friday.
The Dow Jones industrial average fell 280.85 points, or 1%, to 26,583.42. The Nasdaq composite lost 64.30 points, or 0.8%, or 8,111.12.
The new tariff would take effect Sept. 1. The U.S. has already applied tariffs of 25% on $250 billion worth of goods from China. Beijing has retaliated with tariffs on $110 billion in American goods, including agricultural products, in a direct shot at Trump supporters in the U.S. farm belt.
Unlike the earlier set of tariffs, which were meant to minimize the effect on ordinary Americans by targeting industrial goods, the new ones would affect a wide range of consumer products.
Banks, industrials and consumer discretionary were among the hardest-hit sectors Thursday. Bank of America dropped 3.9%, Boeing slid 2% and Gap tumbled 7.9%.
The price of benchmark U.S. crude oil fell $4.63 to $53.95 a barrel. Brent crude oil, the international standard, sank $4.55 to $60.50 a barrel. Energy stocks also fell sharply; Exxon Mobil dropped 2.6%.
Prices for U.S. government bonds rose sharply, sending yields lower. The yield on the 10-year Treasury fell to 1.90%, the lowest level since the 2016 election. That yield, a benchmark used to set interest rates on mortgages and other loans, has been declining steadily since November, when it traded as high as 3.23%. The yield on the two-year Treasury note slid sharply, to 1.73% from 1.87% late Wednesday.
Gold fell $5.20 to $1,420.90 an ounce, silver fell 23 cents to $16.12 an ounce and copper was unchanged at $2.66 a pound.
The dollar fell to 107.33 Japanese yen from 108.77 yen Wednesday. The euro strengthened to $1.1082 from $1.1085.
Traders continued to pore over a steady flow of corporate earnings Thursday, with several big-name companies reporting surprisingly good results. The latest round of reports has been better than Wall Street initially expected just a month ago.
Investors still have some key financial reports to look out for this week. Oil companies Exxon and Chevron will report results Friday. The government will also release its employment report for July on Friday.
Qualcomm fell 2.7% after the chipmaker gave investors a surprisingly weak profit and revenue forecast because of problems in China. A ban on exports to China’s Huawei, which is part of the ongoing trade war between the U.S. and China, is hanging over the company.