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Dow sinks 800 points as trade truce enthusiasm fades

That was fast. Wall Street's enthusiasm for the US-China trade truce has completely vanished.The Dow dropped as much as 805 points, or 3%, on Tuesday....

Posted: Dec 4, 2018 3:59 PM

That was fast. Wall Street's enthusiasm for the US-China trade truce has completely vanished.

The Dow dropped as much as 805 points, or 3%, on Tuesday. It was recently down about 700 points.

The S&P 500 declined 2.5%, while the Nasdaq tumbled 3%.

Big tech stocks fell sharply. Apple (AAPL), Amazon (AMZN) and Alphabet (GOOGL) lost more than 3% apiece.

The selloff wipes out Monday's 288-point jump on the Dow. That rally had been fueled by relief over the ceasefire between the United States and China on the trade front.

But investors are quickly realizing that the US-China trade war is not over. The tariffs already put in place remain. And new tariffs could be implemented if the two sides fail to make progress.

"People are still very concerned about the trade war," said Dan Suzuki, portfolio strategist at Richard Bernstein Advisors. "Financial markets are increasingly showing signs of fear of a recession."

President Donald Trump did not help Wall Street's trade war worries on Tuesday. Trump said that he would "happily" sign a fair deal with China but also left open the possibility that the talks will fail.

"President Xi and I want this deal to happen, and it probably will," Trump tweeted. "But if not remember... I am a Tariff Man."

Those words aren't likely to bolster confidence among investors already worried about the negative consequences of the trade war. Steel and aluminum tariffs have lifted raw material costs and caused disarray in supply chains. And uncertainty about trade policy makes it very difficult for companies to make investment decisions.

Investors have also grown very worried in recent days about fluctuations in the bond market. The gap between short and long-term Treasury rates has narrowed significantly this week. Before almost every recession, the yield curve has inverted, meaning short-term rates are higher than long-term ones.

The gap between the 10-year and two-year Treasury yields dropped on Tuesday to the smallest since just before the Great Recession. And the less closely watched gap between three and five-year Treasury yields inverted on Monday.

The tightening yield curve reflects fears about a growth slowdown and concerns about whether the Federal Reserve is raising interest rates more quickly than the economy can handle. Fed chief Jerome Powell gave a speech last week that investors interpreted as signaling the central bank could slow its rate hikes. However, there is a debate over whether Powell really was telegraphing a sudden change.

Barry Bannister, head of institutional equity strategy at Stifel, predicts the Fed will pause its rate hikes because it has already made monetary policy too tight. He pointed to the slowdown in the housing market caused by higher mortgage rates.

"It's playing with fire to be too tight and risk an inversion because you don't know what the outcome will be," Bannister told reporters on Tuesday. "Even if the Fed pauses, they may have already done too much."

A flattening yield curve and slowing economic growth hurt the profitability of banks.

The financial sector was the second-worst performer in the S&P 500 on Tuesday. Bank of America (BAC), Morgan Stanley (MS) Citigroup (C) and Wells Fargo (WFC) declined more than 4% apiece.

But Suzuki cautioned that the markets could be overreacting. He pointed to strong corporate profits and the fact that the yield curve has not yet inverted.

"We don't see signs of an impending recession," Suzuki said. "There is a widening gap between market fear of a deterioration in the fundamentals and the actual fundamentals themselves."

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 947918

Reported Deaths: 15377
CountyCasesDeaths
Marion1291181990
Lake635721103
Allen53899761
Hamilton44082449
St. Joseph42122590
Elkhart33803491
Vanderburgh30574449
Tippecanoe26915251
Johnson23727418
Hendricks22410342
Porter21832347
Clark17562231
Madison17492385
Vigo16302285
Monroe14545191
LaPorte14389239
Delaware14183222
Howard13971273
Kosciusko11498135
Hancock10935166
Warrick10737178
Bartholomew10635170
Floyd10514208
Wayne10077226
Grant9213204
Morgan8928160
Boone8463111
Dubois7791123
Dearborn769490
Henry7691133
Noble7466101
Marshall7409128
Cass7219118
Lawrence7026153
Shelby6647111
Jackson661386
Gibson6190107
Harrison609386
Huntington604495
Montgomery5853105
DeKalb581091
Knox5535104
Miami548888
Putnam543268
Clinton537465
Whitley529354
Steuben501768
Wabash488692
Jasper483861
Jefferson474492
Ripley457777
Adams446068
Daviess4231108
Scott409165
Clay394957
White393858
Greene393392
Wells389884
Decatur388797
Fayette378578
Posey362341
Jennings356056
Washington334747
LaGrange325175
Spencer321136
Fountain318455
Randolph317190
Sullivan309449
Owen287064
Starke282864
Fulton280454
Orange277859
Jay257038
Perry254152
Carroll245229
Franklin242838
Rush237030
Vermillion235050
Parke221420
Tipton212055
Pike211740
Blackford170534
Pulaski168551
Crawford147318
Newton145845
Benton143916
Brown135846
Martin130217
Switzerland126910
Warren115616
Union98511
Ohio80511
Unassigned0482

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 1385749

Reported Deaths: 21820
CountyCasesDeaths
Franklin1538881574
Cuyahoga1358332341
Hamilton987081326
Montgomery679671161
Summit568451051
Lucas51531869
Butler48000663
Stark42232983
Lorain32046539
Warren30404338
Mahoning27463643
Clermont25990297
Lake24809422
Delaware22566147
Licking20767246
Fairfield20730223
Greene20611275
Trumbull20257516
Medina20074290
Clark18170332
Richland16680236
Portage16389231
Wood15926209
Allen14333261
Miami14018261
Muskingum12927155
Wayne12185244
Columbiana11980242
Tuscarawas11204271
Marion10908150
Pickaway10606129
Scioto10531127
Erie9864171
Ross9612177
Lawrence8934125
Hancock8603143
Ashtabula8474187
Geauga8251156
Belmont8236188
Jefferson7691175
Huron7537131
Union742651
Washington7380126
Athens709365
Sandusky6963135
Darke6875137
Knox6812122
Seneca6519137
Ashland6051115
Auglaize595388
Shelby5820104
Brown575372
Mercer565190
Defiance5564101
Crawford5563117
Madison551071
Highland549282
Fulton542583
Clinton533781
Logan518687
Preble5102111
Putnam4900107
Guernsey484364
Williams468982
Perry462254
Champaign454264
Ottawa442484
Jackson434563
Pike398345
Morrow396451
Coshocton391969
Fayette383753
Adams369275
Hardin366170
Gallia355458
Holmes3321111
Henry329869
Van Wert320771
Hocking310770
Wyandot285458
Carroll266352
Paulding246443
Meigs221742
Monroe192749
Noble174142
Morgan170029
Harrison160741
Vinton141319
Unassigned05
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