Stocks plunge on Wall Street as US-China trade war escalates

Stocks take worst drop of the year as trade war flares

The blue-chip index settled down 767.27 points - or 2.9% - at 25,717.74 - marking its steepest drop of the year, on a points basis, and the sixth biggest drop in the Dow's 123-year history, also based on points fallen.

"This trade spat is going away no time soon, but we should see central bank easing bets rise globally and that will help limit some of the market carnage over the next couple of weeks", said Edward Moya, senior market analyst at Oanda in NY.

Technology stocks, which bore the brunt of Monday's sell-off, helped drive the market's broad gains Tuesday.

The S&P 500 posted five new 52-week highs and 24 new lows; the Nasdaq Composite recorded 20 new highs and 189 new lows. The three-month yield was at 2.00% Monday afternoon, 0.28 percentage points higher than the 10-year's yield.

Dow Jones prices nosedived at a time of heightened volatility in the financial markets with the pan-European Stoxx 600 falling by nearly 2 percent - on top of a 2.5 percent drop seen on Friday, the worst performing day for it in 2019.

"What's really come into the market and spooked investors is the sense that the stakes are rising again", said James McCann, senior economist at Aberdeen Standard Investments.

Trade bellwethers Caterpillar and Boeing dropped 3 percent and 2.3 percent, respectively, while semiconductor stocks like Micron Technology, Skyworks Solutions and Advanced Micro Devices fell by at least 4 percent.

The escalating dispute between the world's largest economies is rattling investors unnerved about a global economy that was already slowing and falling USA corporate profits. Apple slid 5.2%. 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.

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The company is set to report its third-quarter results after market close.

The S&P 500 had been reeling from last week's shock when Trump vowed to slap a 10% tariff on a further $300 billion in imports from China. "The S&P 500 rose 1.35%, and the Nasdaq climbed 1.47%", adds the site. The yield on the two-year note, which is more influenced by interest-rate moves from the Federal Reserve, sank to 1.58% from 1.71%. "They will tumble far more", said Rabobank in a report. When short-term Treasury yields are higher than long-term rates, a rule of thumb says a recession may arrive in about a year.

Meat producer Tyson Foods jumped 5.1% for the biggest gain in the S&P 500 after it reported profits that were better than Wall Street expected.

Benchmark U.S. crude fell 97 cents to settle at $54.69 a barrel. Brent crude, used to price global oils, gained 43 cents to $60.24 per barrel in London. Wholesale gasoline fell 6 cents to $1.72 per gallon. Apple rose 1.3% and Microsoft added 1%.

In Asia, the place tensions between Seoul and Tokyo are worsening in a trade dispute exclusively separate from Washington's and Beijing's, Japan's Nikkei 225 index fell 1.7%, and South Korea's Kospi misplaced 2.6%.

No.1 US meat processor Tyson Foods Inc was one bright spot, up 7.8% after beating quarterly profit estimates. Markets in Hong Kong, Sydney and Seoul also retreated.

Meanwhile, the Swiss franc, another safe-haven currency, rose by 0.4 percent to 1.0864 francs against the euro marking a 25-month high.

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