U.S. Stocks, Bond Yields Fall on Trade Tensions

U.S. stocks wavered 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 slipped 0.9%, on track for a weekly gain of 0.3%. The Dow Jones Industrial Average dropped 0.8%, and the Nasdaq Composite fell 1%. The losses escalated after President Trump vowed to respond to the tariffs later in the day,

China's plans to impose tariffs on $75 billion more in U.S. goods, initially 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 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."

In a highly anticipated speech in Jackson Hole, Wyo, Federal Reserve Chairman Jerome Powell touched on the future of monetary policy.

He said uncertainty over trade policy was "playing a role in the global slowdown and in weak manufacturing and capital spending in the U.S."

He also said the Fed would act accordingly to "sustain the expansion" and led some investors to increase expectations of an interest rate cut at the next meeting.

"This is going to be ping-pong for awhile," said Sean O'Hara, president of the ETF division at Pacer Financial Inc. "That's what we're going to continue to see until we get a resolution, if we ever do. It's probably going to drive the short-term ups and downs of the market."

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.

Auto makers such as General Motors and Ford Motor fell 0.5% and 8%, respectively, underperforming the broader stock market.

The yield on the 10-year Treasury note hovered at 1.574% 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 1124ET
  Copyright (c) 2019 Dow Jones & Company, Inc.

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