The Dow and the broader stock market headed sharply lower on Tuesday. Investors’ sentiment soured after US tariffs on Chinese imports came into effect over the weekend, and economic data pointed at further weakness in manufacturing.
Concerns about Brexit and manufacturing also kept global markets lower.
US stocks opened lower across the board and had added on to their losses by midday following worse-than-expected manufacturing data. The Dow is sharply down, shedding more than 400 points at its lowest point. The index traded 1.3%, or 340 points lower around midday. The S&P 500 and Nasdaq Composite traded 0.7%, and 0.9% lower, respectively.
The Institute of Supply Management’s manufacturing index for August came in at 49.1 — its lowest level since January 2016, and worse than the 51 number expected. A level below 50 indicates that the sector contracted. August marked the first time in three years that the US manufacturing sector shrank.
Earlier, the less-closely watched manufacturing purchasing managers’ index for August came in at 50.3, slightly better than expected.
US manufacturing has been hurting because of the trade war and a global economic slowdown. So far, however, the US consumer has kept the economy roaring.
On Sunday, the United States imposed a 15% tariff on some $110 billion worth of Chinese imports, while Beijing retaliated with 5% to 10% levies on about $75 billion of American imports.
China meanwhile filed a complaint against the United States with the World Trade Organization, according to multiple news reports.
This latest round of US tariffs also hit Chinese-made consumer products, including apparel and electronics. The United States delayed the implementation of about half of these consumer goods tariffs until December 15, aiming not to disrupt holiday shopping too much.
One way or another, American consumers’ worries about the trade war are beginning to crop up in economic data and will be a closely watching part of the data going forward.
Safe haven assets are rallying amid the uncertainty. Gold prices are up 1.8%, and the 10-year US Treasury bond yield dropped to its lowest level since July 2016, according to Refinitiv. Yields and prices move opposite to each other.
European bourses were lower across the board as the future of Brexit is growing more uncertain and a general election could be looming. It would be the third UK election in four years.
The UK’s Conservative Party lost its working majority Tuesday, after a member of parliament defected to the Liberal Democrats. The British pound slumped to its weakest level in three years in response. The UK’s FTSE 100 traded 0.2% lower.