Stocks drop 3% on Wall Street, their worst drop of the year, as China counters Trump's tariffs with cheaper currency
Specialists Paul Cosentino, left, and Jeffrey Berger work on the floor of the New York Stock Exchange, Monday, Aug. 5, 2019. U.S. stocks nosedived in early trading on Wall Street Monday as China's currency fell sharply and stoked fears that the trade war between the world's two largest economies would continue escalating.
The escalations in the trade war between the world’s largest economies are rattling investors already unnerved about a slowing global economy, falling U.S. corporate profits and possibly too-weak inflation. The yield on the 10-year Treasury note, which rises with expectations of stronger economic growth and inflation, fell to its lowest level since Trump’s 2016 election energized markets, down to 1.73% from 1.85% late Friday. The yield on the 2-year note sank to 1.58% from 1.71% a day earlier. Both are unusually large moves.
A weaker yuan gives Chinese manufacturers a boost by making their products cheaper on worldwide markets for buyers using dollars or other currencies. That hurts U.S. manufacturers, which have already been hit by the slowing global economy. It also adds more downward pressure on inflation, which some economists worry may be edging toward too weak.
Technology stocks bore the brunt of Monday’s selling, and Apple slid 5%. It not only depends on Chinese factories to assemble its iPhones, but China is also the only country aside from the United States that accounts for more than 10% of its sales. Chip stocks were also among the hardest hit in the S&P 500, and Nvidia sank 6.9%.
Meat producer Tyson Foods jumped 6.5% for the biggest gain in the S&P 500 after it reported profits that were better than Wall Street expected. It was one of only 15 stocks in the S&P 500 able to eke out a gain.
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