Investors are digesting the probability of the trade war between the United States and China continuing, taking a toll on businesses and consumers as the two countries ratchet up tariffs on each other’s exports.
The S&P 500 tumbled more than 2 percent on Monday, with trade-dependent companies hit the hardest after Beijing said it would retaliate against the Trump administration’s plan to raise tariffs on Chinese goods. After the losses it experienced last week, the benchmark index is now down more than 4 percent this month.
The drop is a turnabout for seasoned investors who had previously sloughed off concerns about the trade war’s impact on the global economy, corporate profits and American consumers.
They are now acutely focused on the daily trade twists, and the fallout in the financial markets has been swift. Shares of companies with significant exposure to China, including semiconductor makers that rely on production networks in the country, have fared badly in the past week.
On Monday, Apple, which counts China as a major market for the sale of its iPhone and other devices and leans heavily on Chinese suppliers to produce them, fell more than 4 percent. Boeing, one of the largest exporters in the United States dropped more than 3 percent. Wynn Resorts, which is heavily reliant on casino operations in Macau that cater to gamblers from mainland China, fell about 6 percent.
As stocks have wobbled over the past week, some analysts have argued that a decline was long overdue for a market that soared to a record high in the first four months of the year. There was a shift after President Trump expressed frustration over the state of trade talks between the world’s two largest economies. On Friday, Mr. Trump raised tariffs on $200 billion worth of Chinese-made goods.
But signs of economic anxiety also appeared in other financial markets on Monday. The price of Treasury bonds rose, as investors sought the safety of government securities. Prices for soybeans and copper, both of which are sensitive to global growth and trade, dropped. Interest rates rose in corporate bond markets, an indication that investors were seeking higher premiums in response to the increased economic risks of a worsening trade fight.
“This would essentially be another thorn in the global economy’s side,” Gregory Daco, chief U.S. economist at consulting firm Oxford Economics.
Alternatively, the global economy continues to expand, the pace of growth in has slowed in recent months in much of the world. On April 9, the International Monetary Fund reduced its growth forecast for 2019 to 3.3 percent, which would be among the slowest annual paces in the past decade. In adjusting its forecast, the fund citing, in part, the tensions between China and the United States. It also said it expected about 70 percent of the global economy to slow this year.
Stocks in Europe added to earlier losses in afternoon trade on Monday, with the CAC 40 index in France and the Dax in Germany down by more than 1 percent.
In Asia, where trading ended before Beijing’s tariff announcement, the Shanghai Composite Index fell 1.2 percent, and the Shenzhen Composite Index fell 1.1 percent. In South Korea, the Kospi index fell 1.4 percent, Taiwan’s Taiex index fell by a similar amount and Japan’s Nikkei 225 index lost 0.7 percent.