Wall St. lower from Trump's China tariff threat but recovers some losses

NEW YORK: U.S. stocks posted broad-based declines on Monday after President Donald Trump’s threat to raise tariffs on Chinese goods reignited fears of a global economic slowdown, though the major indexes pared losses in afternoon trading as energy shares rose.

Trump on Sunday said tariffs on $200 billion worth of Chinese goods would increase to 25% from 10%, reversing a decision he made in February to retain them at 10% as the United States and China made progress on trade talks.

China said on Monday that a delegation is still preparing to go to the United States but did not mention if Vice Premier Liu He, its lead official in the negotiations, will be part of the team as originally planned.

The threat sent the S&P 500 down as much as 1.6% during the session and led to a drop in U.S. Treasury yields as investors turned to low-risk government bonds.

“It’s not a U.S. issue as much as a China-based issue,” said Chad Morganlander, senior portfolio manager at Washington Crossing Advisors in Florham Park, New Jersey. “But emerging market economic growth has been the engine of global growth over the past five years. When China catches a cold, Europe catches the flu and the U.S. catches the sniffles.”

Boeing Co, the single largest U.S. exporter to China, fell 1.4%. Chipmakers, which get a sizable portion of their revenue from China, also tumbled. The Philadelphia chip index slid 1.8%. Apple Inc shares, which have also been sensitive to signs of weakness in China, declined 1.5%.

However, the major indexes pared some losses as some investors remained hopeful that a trade agreement would soon be reached.

“Obviously it was a negative start, but the market still appears confident that we will get a China trade deal and this was Trump’s art of the deal strategy,” said Gary Bradshaw, portfolio manager with Hodges Funds in Dallas.

The S&P 500 energy index also turned positive in afternoon trading as oil prices reversed course to trade higher on rising tensions between the United States and Iran.

Healthcare shares also rose. At the Sohn Investment Conference on Monday, Glenview Capital Management Chief Executive Larry Robbins said he favored the sector.

The Dow Jones Industrial Average fell 73.88 points, or 0.28%, to 26,431.07, the S&P 500 lost 11.47 points, or 0.39%, to 2,934.17 and the Nasdaq Composite dropped 38.80 points, or 0.48%, to 8,125.20.

The benchmark S&P 500 is now nearly 1% below its intra-day record high of 2,954.13 hit last week.

In a bright spot, Anadarko Petroleum Corp shares rose 4.0% after Occidental Petroleum Corp increased the cash component of its $38 billion bid, removing a need for any deal to receive the approval of Occidental’s shareholders.

Occidental is trying to convince Anadarko to accept its offer and abandon the agreed-upon $33 billion sale to Chevron Corp. Shares of Chevron rose 1.7%.

Declining issues outnumbered advancing ones on the NYSE by a 1.58-to-1 ratio; on Nasdaq, a 1.23-to-1 ratio favored decliners.

The S&P 500 posted 12 new 52-week highs and four new lows; the Nasdaq Composite recorded 57 new highs and 32 new lows.