By Chris Matthews and Barbara Kollmeyer, MarketWatch
China editorial says country won't 'bow to any extreme
pressure'
U.S. stocks fell sharply Monday morning as China moved to raise
tariffs on U.S. goods and take other retaliatory measures after
Washington last week increased duties on Chinese imports.
How did the benchmark indexes fare?
The Dow Jones Industrial Average 521 points, or 2%, to 25,429,
while the S&P 500 index dropped 60 points, or 2.1%, to 2,821.
The Nasdaq Composite Index slid 213 points, or 2.7%, to 7,700.
On Friday
(http://www.marketwatch.com/story/us-stock-futures-ease-as-higher-tariffs-on-china-imports-kick-in-2019-05-10),
the Dow rose 114.01 points, or 0.4%, to end at 25,942.37,
recovering from a deficit of more than 350 points. The S&P
gained 0.4% to 2,881.40, while the Nasdaq climbed 0.1% to
7,916.94.
For the week, the Dow fell 2.1%, its biggest weekly loss since
March. The S&P saw a 2.2% weekly fall and the Nasdaq shed 3%,
the biggest losses for both since the week ending Dec. 21.
Read:Why the stock market is at the mercy of the U.S. consumer
(http://www.marketwatch.com/story/why-the-stock-market-is-at-the-mercy-of-the-us-consumer-2019-05-11)
What drove the market?
Trade tensions that drove volatility for stocks last week were
rebooting Monday, as investors confronted the prospect that a
U.S.-China tariff deal could take longer than anticipated, if a
pact occurs at all. Talks in Washington ended Friday without an
agreement.
After raising tariffs on $200 billion worth of annual Chinese
imports to 25% from 10$ on Friday, the Trump administration said it
was ready to impose higher tariffs on another roughly $300 billion
of goods, or nearly all the remaining products Americans buy from
the second-largest economy.
On Monday, Chinese officials announced retaliatory tariffs
(http://www.marketwatch.com/story/china-announces-tariffs-as-high-as-25-on-60-billion-of-us-items-2019-05-13)
against the U.S., hitting $60 billion in annual exports to China
with new or expanded duties that could reach 25%. Hu Xijin, editor
in chief of China's Global Times, a daily Chinese tabloid with ties
to the Communist Party, reported on Twitter Monday morning that
China may take further steps in the coming days and weeks.
(https://twitter.com/HuXijin_GT/status/1127909254134767616)
In several tweets over the weekend, President Donald Trump
argued that the U.S. was in an advantageous position over trade,
though White House economic adviser Larry Kudlow admitted Sunday
that "both sides" will feel the pain
(http://www.marketwatch.com/story/larry-kudlow-contradicts-president-trump-on-a-critical-aspect-of-the-trade-war-2019-05-12).
His comment that Trump and China's President, Xi Jinping, may meet
at the Group of 20 international conference in June failed to
soothe investors.
Trump early Monday continued to send tweets regarding the talks,
arguing that there was "no reason" for U.S. consumers to pay
tariffs and that companies would leave China to avoid the duties if
a deal isn't reached.
(https://twitter.com/realDonaldTrump/status/1127886307995336705)
Chinese media over the weekend ran several editorials blasting
the U.S. position and vowing that Beijing would stand firm in the
talks.
Also read:Chinese media says 'fierce U.S. offensive' over trade
won't work
(http://www.marketwatch.com/story/china-media-says-fierce-us-offensive-over-trade-wont-work-2019-05-13)
Which stocks are in focus?
Shares of several companies perceived as sensitive to rising
U.S.-China trade tensions were under pressure before the start of
trade Monday, including Apple Inc. (AAPL), semiconductor firm
Advanced Micro Devices Inc. (AMD), and Intel Corp. (INTC).
Uber Inc. stock will remain in focus Monday, after the
ride-hailing firm made its debut on the New York Stock Exchange
Friday. After pricing at $45 per share, Uber stock closed down
(http://www.marketwatch.com/story/ubers-ipo-was-the-5th-worst-over-the-past-quarter-century-by-this-measure-2019-05-10)
7.6% at 41.57. Shares remain under pressure Monday, down 9.7%.
Videogame publisher Take-Two Interactive Software Inc. (TTWO)
and Tencent Holdings Ltd. (0700.HK) are both set to report earnings
after the close on Monday.
What's on the economic calendar?
At 11 a.m. Eastern Time, the Federal Reserve will release its
survey of consumer expectations.
Fed Vice Chairman Richard Clarida gave a speech Monday morning
on the central bank's ongoing review of its overall monetary policy
strategy, saying "we expect to make our conclusions public in the
first half of 2020."
Federal Reserve Bank of Boston President Eric Rosengren also
gave a speech at the bank's "Fed listens" conference Monday
morning.
What are strategists saying?
"Any good will to risk assets on Friday has faded through Asia,
and there the preservation of capital is the overriding theme,
although there is absolutely no panic," said Chris Weston, head of
research at Pepperstone.
"Protectionism and the impact that can have on demand can be
hard to model, and it feels that with these dynamics in play the
market will further de-risk, with traders wanting a return of their
equity, as opposed to on their equity," Weston added.
How are other assets trading?
Trade worries weighed on Asian markets
(http://www.marketwatch.com/story/asian-stocks-move-lower-monday-as-markets-react-to-failed-us-china-trade-talks-in-washington-2019-05-13),
where the Shanghai Composite closed down 1.2% and other major
indexes logged losses of 1% or more. Europe followed suit with the
Stoxx Europe 600 down 1.2%.
As investors backed out of equities, haven assets such as the
Japanese yen got a bid, with the rising 0.1% to Yen109.68 against
the dollar , while gold rose 0.8%.
Oil prices were climbing
(http://www.marketwatch.com/story/oil-prices-climb-after-saudis-say-attacks-damaged-tankers-2019-05-13)
after Saudi Arabia said two oil tankers were attacked
(http://www.marketwatch.com/story/saudi-arabia-says-two-of-its-oil-tankers-attacked-near-strait-of-hormuz-2019-05-13)near
the Strait of Hormuz early Sunday.
See:Strait of Hormuz: Oil 'choke point' in focus as U.S. ends
Iran waivers
(http://www.marketwatch.com/story/strait-of-hormuz-oil-choke-point-in-focus-as-us-ends-iran-oil-waivers-2019-04-23)
Check out: Here are the stocks to buy if an all-out U.S.-China
trade war erupts, says Goldman
(http://www.marketwatch.com/story/here-are-the-stocks-to-buy-if-an-all-out-us-china-trade-war-erupts-says-goldman-2019-05-08)
(END) Dow Jones Newswires
May 13, 2019 09:56 ET (13:56 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.