US stock and crop futures down after China announces tariffs

Alex Whitebrook/ April 4, 2018/ News/ 0 comments

Wall Street futures were down Wednesday after China announced that it is imposing tariffs on U.S. goods in response to President Donald Trump’s proposed tariffs.

China bumped up tariffs by as much as 25 percent on 128 U.S. products, from frozen pork and wine to fruits and nuts, in response to U.S. duties on imports of aluminum and steel.

U.S. crop futures dropped after the announcement, including corn for May delivery falling 2.45 percent to $3.79 per bushel, according to Factset data, while soybean futures dropped 3.85 percent to $9.98 per bushel.

Gold snapped a three-session losing streak and the dollar fell after the tariffs, which are due to take effect on Monday, were announced late Sunday by China’s finance ministry.

The three major U.S. stock indexes fell more than 2 percent each as the rout wiped out the tech-heavy Nasdaq index’s gains for the year and sent the benchmark S&P 500 crashing through its 200-day moving average, a closely watched technical indicator.

It was the first time the index closed below its 200-day moving average since June 2016 in the wake of Britain’s decision to leave the European Union, known as Brexit.

Trading was light as major European markets closed for Easter Monday. Markets in Australia and Hong Kong also were shut.

Shares of Amazon, Microsoft, Intel and Facebook were the biggest drag on MSCI’s all-country world stock index, which fell 1.23 percent.

The four companies also were the biggest weights on the benchmark S&P 500 index as it broke through its 200-day moving average after threatening to do so the past five sessions.

“It’s a technical breakdown. A house catches on fire, it burns rather quickly and that is what is happening now,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

“Until we get to the earnings season, this market is going to shed more pain,” he said, referring to first-quarter corporate results that will begin in earnest in two weeks.

Nicholas Colas, co-founder of Datatrek Research in New York, said there was a “reset” on how much exposure to technology shares investors are willing to bear.

“This is still primarily a tech-led sell-off and what we’ve learned over the past two weeks is just how overweight investors were in technology,” Colas said.

The Dow Jones Industrial Average closed down 458.92 points, or 1.9 percent, to 23,644.19. The S&P 500 lost 58.99 points, or 2.23 percent, to 2,581.88 and the Nasdaq Composite dropped 193.33 points, or 2.74 percent, to 6,870.12.

The Dow is now down 4.4 percent for the year, the S&P 500 is off 3.4 percent and the Nasdaq 0.48 percent.

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