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

U.S. stocks slumped after China said it would impose retaliatory tariffs on additional U.S. products and President Trump responded on Twitter, escalating the trade tensions that have rattled markets in recent weeks.

The S&P 500 dropped 1.4%, on track to give up its gains for the week. The Dow Jones Industrial Average fell 1.3%, and the Nasdaq Composite declined 1.6%. 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 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."

President Trump responded to China's move on Twitter, saying, "We don't need China and, frankly, would be far better off without them." He ordered U.S. companies to start looking for alternatives to producing in China.

His comments came shortly after Federal Reserve Chairman Jerome Powell said uncertainty over trade policy was " playing a role in the global slowdown and in weak manufacturing and capital spending in the U.S."

In a highly anticipated speech in Jackson Hole, Wyo., Mr. Powell 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.

President Trump criticized Mr. Powell in Friday's tweets, saying "the Fed did NOTHING."

"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."

Auto makers such as General Motors and Ford Motor fell about 2.1% and 2%, respectively, underperforming the broader stock market.

The yield on the 10-year Treasury note hovered at 1.540% 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.

Caitlin Ostroff contributed to this article.

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


  (END) Dow Jones Newswires
  08-23-19 1152ET
  Copyright (c) 2019 Dow Jones & Company, Inc.

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.