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Dow closes sharply lower as trade war jitters linger

CNBC logo CNBC 3/14/2018 Alexandra Gibbs and Thomas Franck
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The Dow Jones industrial average fell sharply Wednesday as Boeing shares pulled back on worries the U.S. could engage China in a trade war.

The 30-stock index ended down 248 points after opening up more than 100 points. Boeing dropped 2.5 percent, contributing the most to the Dow's decline.

Boeing's drop comes after a report said President Donald Trump wishes to slap $60 billion of tariffs on Chinese goods. Investors feared China could target the aerospace giant in retaliation.

The S&P 500 lost nearly 0.6 percent amid weak performances in materials, industrials and consumer staples companies. Utilities stocks jumped, with the Utilities Select Sector SPDR Fund (XLU) climbing more than 1 percent. The fund was also on track for its first five-day winning streak since late November. 

The Nasdaq slid 0.2 percent.

"This volatility is the norm not the exception now," said Art Hogan, chief market strategist at B. Riley FBR. "It's the perception of what tariffs mean ... right now we're focused on significant tariffs on Chinese goods."

Asian equities were down, with the Nikkei 225 falling 0.87 percent and the Shanghai composite dropping 0.57 percent. In Europe, the Stoxx Europe 600 rose 0.5 percent as corporate news helped lift the major indexes.

Last week, President Donald Trump signed two declarations to impose tariffs on steel and aluminum imports — both are expected to take effect in the coming weeks. While Canada and Mexico are exempt from the deal, fears over a potential trade war remain, as investors worry that countries around the world may impose their own retaliatory tariffs.

A source told CNBC on Tuesday that Washington is contemplating a trade package that would include investment restrictions, indefinite tariffs and potentially even visa restrictions on Chinese travelers.

"Certainly the stock market is being supported by the economy and earnings being in double digits this year," said Bruce Bittles, chief investment strategist at Baird. "I'd say the one problem area is the technical situation and that the rally is getting more narrow ... That would suggest we may have another retest of the February lows before this is all over."

But as for political news on trade and a possible trade war, Bittles said that those worries are likely "overstated."

German apparel company Adidas climbed more than 12 percent after it revised upward its long-term profit target and said it would propose a higher dividend.

Investors will also be reflecting on Trump's decision to fire Secretary of State Rex Tillerson, followed by the announcement that he would nominate CIA Director Mike Pompeo as Tillerson's replacement.

Ford's stock rallied more than 3 percent after Morgan Stanley upgraded the company to overweight from underweight. The bank sees more potential in the American motor vehicle company following "significant changes" to senior management at the company and its efforts to improve its global portfolio.

Shares of Qualcomm fell more than 1.5 percent after Broadcom announced that it is formally ending its hostile bid for the American chipmaker. Qualcomm stock fell nearly 5 percent Tuesday after President Trump ordered Broadcom to abandon the deal.

Yields on 10-year Treasurys fell to 2.832 percent Wednesday in New York, their lowest level since early March. Yields move inversely to prices.

In economic data, U.S. producer prices increased slightly more than expected in February. The Department of Labor said on Wednesday that its producer price index rose 0.2 percent last month; economists polled by Reuters had expected PPI gaining 0.1 percent.

So-called core PPI — which excludes volatile food, energy and trade service prices — rose 0.4 percent.

The Commerce Department said retail sales declined for a third straight month on Wednesday as households curbed purchases of cars and other expensive items. Economists had been expecting sales to rise 0.3 percent.

CNBC's Gina Francolla contributed to this report.

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