Dow drops about 200 points after US unveils new tariffs on Chinese goods
The Dow Jones Industrial Average fell 218 points with Caterpillar, DowDuPont and Chevron as the biggest decliners. The 30-stock index was also on track to snap a four-day winning streak.
The S&P 500 dropped 0.7 percent as energy plunged more than 2 percent. Energy shares fell as crude shed 5 percent. The Nasdaq Composite declined 0.6 percent.
President Donald Trump's administration published late Tuesday a list of 10 percent duties on $200 billion worth of Chinese goods. The tariffs won’t come into effect immediately, but rather face a review process, with hearings taking place in mid-to-late August.
The announcement came just days after both nations imposed $34 billion worth of tariffs on each other.
Shares of Boeing and Caterpillar — two companies with high overseas revenue exposure — fell 1.9 percent and 3.2 percent, respectively. Chipmakers also pulled back as Nvidia, Intel and Advanced Micro Devices all dropped more than 1.5 percent.
Investors have been rattled recently by the escalation in trade relations. But Dubravko Lakos-Bujas, head of U.S. equity strategy at J.P. Morgan, thinks strong corporate earnings growth will outweigh the negative sentiment presented by those trade fears.
“Despite trade headlines, S&P 500 companies should deliver robust earnings on above-trend revenue growth and sharply higher margins,” Lakos-Bujas said in a note Wednesday. “While weaker overseas growth, stronger USD, and trade risks warrant some caution, consensus is likely too conservative considering rising disposable income ... and lower household expenses.”
Corporate earnings are expected to have risen 20 percent in the second quarter, according to FactSet. The earnings season got under way this week with PepsiCo reporting better-than-expected earnings on Tuesday. J.P. Morgan Chase, Citigroup and Wells Fargo are all scheduled to report later this week.
"You have to expect more volatility moving forward," said JJ Kinahan, chief market strategist at TD Ameritrade. "You have to listen to what the CEOs and CFOs say about these tariffs and how its impacting their businesses."
"It's almost like the dollar a few years ago," he said. "Back then, even Facebook said the strong dollar was killing them."
Global markets also fell on the new tariffs announcement. In Europe, the Stoxx 600 index slid more than 1 percent, while the Shanghai Composite dropped 1.8 percent. Treasury yields slipped — pushing prices higher — with the benchmark 10-year yield trading at 2.85 percent.
Trump is currently in Brussels attending a two-day NATO summit. During the first leg of his European trip, the U.S. incumbent has already made headlines by stating that “Germany is totally controlled by Russia,” describing how a number of “inappropriate” oil and gas deals had given Moscow too much influence over Berlin.
Shares of drug makers also fell after Pfizer said it will postpone price increases after a conversation with the president. Pfizer fell 0.6 percent, while Biogen slipped 0.2 percent. Merck declined 0.6 percent.
American Airlines fell nearly 8.1 percent after the company trimmed it s outlook for second-quarter revenue growth.
—CNBC’s Sam Meredith contributed to this report
Gina Sanchez of Chantico Global says a North Korean attack, should
one occur, isn't likely to cause significant long-term market impact.
Boris Schlossberg of BK Asset Management says the ISM
non-manufacturing report is key to watch ahead the jobs data released
Chad Morganlander of Washington Crossing Advisors is watching the
dollar this week and expects it'll begin to strengthen heading into the
second half of the year.
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In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.