NEW YORK (AP) — A monthslong calm on Wall Street is breaking on Friday, and U.S. stocks are falling after President Donald Trumpthreatened to crank tariffs even higher on China.
The S&P 500 dropped 1.2% and was on track for its worst loss since Aug. 1. The Dow Jones Industrial Average was down 372 points, or 0.8%, after earlier falling as much as 579 points. The Nasdaq composite was 1.7% lower, as of 11:45 a.m. Eastern time.
Stocks had been heading for a slight gain in the morning, until Trump took to his social media platform and said he’s considering “a massive increase of tariffs” on Chinese imports. He’s upset at restrictions China has placed on exports of its rare earths, which are materials that are critical for the manufacturing of everything from consumer electronics to jet engines.
“We have been contacted by other Countries who are extremely angry at this great Trade hostility, which came out of nowhere,” Trump wrote on Truth Social. He also said that he now sees “no reason” to meet with China’s leader, Xi Jinping, as part of an upcoming trip to South Korea
The ratcheting up of trade tensions between the world’s two largest economies caused a widespread drop on Wall Street, with three out of every four stocks within the S&P 500 falling.
Levi Strauss dropped 12.3% for one of the market’s largest losses, even though it reported a stronger profit for the latest quarter than analysts expected.
Its forecast for profit over the full year was also within range of Wall Street’s estimates, but the jeans and clothing company could be facing the challenge of high expectations. Its stock price came into the day with a stellar surge of nearly 42% for the year so far.
The rest of the market is facing similar pressures after it ran to record heights following a nearly relentless run and soared roughly 35% since a low in April.
Critics are calling the market too expensive after prices rose much faster than corporate profits, particularly for companies in the artificial-intelligence industry. For stocks to look less expensive, either their prices need to fall, or profits need to rise.
Some of Friday’s strongest action was also in the oil market, where the price of a barrel of benchmark U.S. crude sank 3.6% to $59.27.
It fell as a ceasefire between Israel and Hamas came into effect in Gaza, raising hopes for less violence in the Middle East. An end to the war could remove worries about disruptions to oil supplies, which had kept crude’s price higher than it otherwise would have been.
Brent crude, the international standard, dropped 3.3% to $63.08 per barrel.
In the bond market, the yield on the 10-year Treasury sank to 4.06% from 4.14% late Thursday.
A report from the University of Michigan on Friday morning suggesting sentiment among U.S. consumers is going sideways had limited impact on the market.
“Pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers’ minds,” according to Joanne Hsu, director of the Surveys of Consumers. “At this time, consumers do not expect meaningful improvement in these factors.”
The job market has slowed so much that the Federal Reserve cut its main interest rate last month for the first time this year. Fed officials have also penciled in several more cuts to rates through the end of next year to give the economy more breathing room. But Chair Jerome Powell has also said they may have to shift course if inflation stays high. That’s because lower interest rates can push inflation even higher.
One encouraging signal from the University of Michigan’s preliminary survey said consumers’ expectations for inflation in the coming year edged down to 4.6% from 4.7% the month before. While that’s still high, the direction of change could still help the Fed by limiting upward pressure on inflation.
In stock markets abroad, indexes fell across much of Europe and Asia.
Hong Kong’s Hang Seng fell 1.7%, and Japan’s Nikkei 225 dropped 1% for two of the bigger moves. But South Korea’s Kospi leaped 1.7% after trading reopened following a holiday.
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AP Writer Teresa Cerojano contributed.
