U.S. Stocks, Bond Yields Fall on China's Retaliatory Tariffs

U.S. stocks, commodities and Treasury yields faltered after China said it would impose retaliatory tariffs on additional U.S. products, escalating the trade tensions that have rattled markets in recent weeks.

The S&P 500 fell 0.5% and the Dow Jones Industrial Average lost roughly 0.4% shortly after the opening bell. The Nasdaq Composite slipped 0.6%.

China said it plans to impose tariffs on $75 billion more in U.S. goods, including agricultural products, apparel, chemicals and textiles.

The country's retaliation led U.S. stock futures lower after rising in early trading. The news also pushed yields on government bonds lower and spurred selling in commodities markets, like oil and copper, that are sensitive to the two countries' ongoing trade battle.

The yield on the 10-year Treasury note pared its earlier gains and hovered at 1.601% in recent trading, according to Tradeweb, compared with 1.613% Thursday.

The ratcheting-up of trade tensions came ahead of a highly anticipated speech from Federal Reserve Chairman Jerome Powell later Friday on the future of monetary policy.

"The timing of it is remarkable," said John Brady, managing director at futures brokerage R.J. O'Brien & Associates, of the trade news. "It puts tariffs front and center on a very important day for markets."

Markets will be watching for clarity from Mr. Powell and other central-bank leaders at the Jackson Hole symposium on the likelihood of further moves to lift a stagnant global economy.

Mr. Powell is set to speak Friday at 10 a.m. ET. Bank of England Gov. Mark Carney will speak later in the day.

Lower interest rates would likely drive down bond yields further and could boost equities, said Connor Campbell, a financial analyst at Spreadex. "They're putting a lot of their eggs in a central-bank basket, " Mr. Campbell said of stock-market investors.

Analysts said the Fed chairman will have to show he is willing to take strong action to support the economy. Dallas Fed President Robert Kaplan said Thursday at the gathering of central bankers that he was open to cutting rates in September.

Though Mr. Kaplan came out in support, other officials were split. In television interviews Thursday, the head of the Kansas City Fed and the Philadelphia Fed pushed back against the need for further rate cuts. In July, the Fed lowered its benchmark rate.

Friday's moves in stocks came a day after a series of weak manufacturing data around the world raised concerns about a possible recession, weighing on U.S. indexes.

The Stoxx Europe 600 slipped 0.2% in afternoon trade.

The WSJ Dollar Index, which measures the currency against a basket of its peers, ticked up 0.1%.

Write to Gunjan Banerji at Gunjan.Banerji@wsj.com

By Caitlin Ostroff and Gunjan Banerji

U.S. stocks, commodities and Treasury yields faltered after China said it would impose retaliatory tariffs on additional U.S. products, escalating the trade tensions that have rattled markets in recent weeks.

The S&P 500 fell 0.3% and the Dow Jones Industrial Average lost 0.1%. The Nasdaq Composite slipped 0.4%.

China said it plans to impose tariffs on $75 billion more in U.S. goods, including agricultural products, apparel, chemicals and textiles.

The country's retaliation pushed yields on U.S. government bonds lower and spurred selling in commodities markets, such as oil and copper, that are sensitive to the two countries' trade battle.

The ratcheting-up of trade tensions came ahead of a highly anticipated speech from Federal Reserve Chairman Jerome Powell on the future of monetary policy, which helped major U.S. stock indexes pare some of their declines.

Mr. Powell's comments in Jackson Hole, Wyo., touched on such trade policy uncertainty. He said that such uncertainty was "playing a role in the global slowdown and in weak manufacturing and capital spending in the U.S."

He also said that the Fed would act accordingly to "sustain the expansion."

These comments helped major U.S. indexes claw back some of their earlier losses.

"The timing of it is remarkable," said John Brady, managing director at futures brokerage R.J. O'Brien & Associates, of the trade news. "It puts tariffs front and center on a very important day for markets."

Markets were awaiting clarity from Mr. Powell and other central-bank leaders at the Jackson Hole symposium on the likelihood of further moves to lift a stagnant global economy.

Lower interest rates would likely drive down bond yields further and could boost equities, said Connor Campbell, a financial analyst at Spreadex. "They're putting a lot of their eggs in a central-bank basket, " Mr. Campbell said of stock-market investors.

The S&P 500's energy and consumer discretionary sectors were some of the biggest losers Friday, falling about 0.7% apiece. Auto makers such as General Motors and Ford Motor fell 0.7% and 1%, respectively, underperforming the broader stock market.

The yield on the 10-year Treasury note hovered at 1.589% in recent trading, according to Tradeweb, compared with 1.613% Thursday.

Friday's moves in stocks came a day after a series of weak manufacturing data around the world raised concerns about a possible recession, weighing on U.S. indexes.

Write to Gunjan Banerji at Gunjan.Banerji@wsj.com


  (END) Dow Jones Newswires
  08-23-19 0957ET
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