Arthur J. Villasanta – Fourth Estate Contributor
New York, NY, United States (4E) – Global markets, including the United States, fell on news the Trump administration will push ahead with 10 percent tariffs on $200 million worth of Chinese goods next week. The news panicked Chinese investors, with the Shanghai Stock Exchange (China’s largest) plummeting to its lowest level in four years.
All three major U.S. indices closed lower Monday, with the tech-heavy NASDAQ absorbing its biggest percentage loss since late July.
The Dow Jones Industrial Average fell 55 points, or 0.35 percent, to 26,062.12. The S&P 500 shed 16.18 points, or 0.56 percent, to 2,888.8 while the NASDAQ Composite lost 114.25 points, or 1.43 percent, to 7,895.79. The CBOE Volatility index (VIX), a reliable indicator of investor anxiety, rose 1.54 points, its first increase in six sessions.
Hard hit in the Dow were the so-called FAANG (Facebook, Apple, Alphabet, Netflix, Google) stocks. All of the FAANG group of momentum stocks closed down between 1.0 percent and 3.9 percent.
“(The FAANG stocks have) had great runs; the fact that they’d come off a little bit really doesn’t detract from the fact that they’ve put in some very good performance numbers this year,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. He noted, however, that “investors might be slowly looking outside of tech for the next opportunity.”
Apple Inc saw its shares slide 2.7 percent, becoming the biggest drag on the Dow. Investors took no comfort in reports administration will spare some of its products such as the Apple Watch in the latest round of tariff actions to take effect Sept. 24. The administration will impose another 15% tariffs on these same good in January 2019.
Declining issues outnumbered advancing ones on the NYSE by a 1.46-to-1 ratio. At the NASDAQ, a 2.12-to-1 ratio favored decliners
In China, the main Shanghai Composite index fell 1.1 percent to 2,651.79 points Monday, its worst close since Nov. 27, 2014. The blue-chip CSI300 index also declined 1.1 percent to 3,204.92 points.
In Hong Kong, the Hang Seng index was 1.3 percent lower in late afternoon trade. The H-shares only Hang Seng China Enterprises Index was off 1.2 percent. The sub-index of the Hang Seng index tracking energy shares slipped 0.6 percent while the IT sector closed 2.6 percent lower.
The smaller Shenzhen index closed 1.5 percent lower on Monday while the ChiNext start-up board wwound-up 1.2 percent lower.Predictably, the yuan weakened on the news.
The depreciation came despite the People’s Bank of China (the de facto central bank) setting the midpoint of the currency’s daily trading band far firmer than expected. The yuan traded as low as 6.8756 to the dollar before strengthening slightly to 6.8699 per dollar as of 0725 GMT on Monday.
The Trump administration announced new tariffs of 10 percent Monday. China promised to retaliate for any new U.S tariff action, and might scupper future talks if the new tariffs are announced. An editorial in the state-owned newspaper Global Times said that China looks forward to a more beautiful counter-attack “and will keep increasing the pain felt by the U.S.”
Analysts said this seems to indicate that China will selectively target components vital to America’s supply chain as a retaliatory move. This action will disrupt production schedules for U.S. firms, especially those in the tech sector such as Apple.
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