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

U.S. stocks slumped Friday after China said it would impose retaliatory tariffs on additional U.S. products and President Trump vowed to respond.

The Dow Jones Industrial Average dropped about 450 points, or 1.7%, putting a halt to a relatively quiet week for markets. Yields on U.S. government bonds also tumbled, as did commodities markets, such as oil and copper, that are sensitive to the two countries' trade battle.

The losses accelerated after President Trump fired off a series of Tweets in response to China's plan to impose tariffs on $75 billion more in U.S. goods.

"We don't need China and, frankly, would be far better off without them, " he said on Twitter, while ordering U.S. companies to start looking for alternatives to producing in China.

"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."

The developments overshadowed a highly anticipated speech from Federal Reserve Chairman Jerome Powell in Jackson Hole, Wyo., about the future of interest-rate policy.

Mr. 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," adding the Fed would act accordingly to "sustain the expansion."

In Friday's tweets, Mr. Powell again drew the ire of President Trump who "the Fed did NOTHING."

Investors said that they weren't expecting a quick resolution and anticipated more volatility.

"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."

The S&P 500 dropped 1.7%, on track to give up its gains for the week, while the Nasdaq Composite declined 2%.

Shares of technology companies were some of the biggest hit in the S&P 500, falling 2.7% and under-performing the broader gauge. Retail stocks also took a hit, with L Brands and Hasbro each diving more than 7%.

Auto makers such as General Motors and Ford Motor fell about 2.7% and 2.3%, respectively. Caterpillar, which has also been sensitive to trade news, fell about 3%. Apple dropped 3.9%.

The yield on the 10-year Treasury note hovered at 1.538% in recent trading, according to Tradeweb, compared with 1.613% Thursday. U.s. crude oil dropped 3% to $53.66 a barrel.

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 1252ET
  Copyright (c) 2019 Dow Jones & Company, Inc.

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