Dow down over 450 points as Trump threatens new China tariffs, earnings disappoint

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Stocks slumped early Friday, kicking off May on a down note as investors showed disappointment with earnings from big tech companies and President Donald Trump’s threat to impose import tariffs on China in retaliation for its handling of the COVID-19 pandemic.

What are major indexes doing?

The Dow Jones Industrial Average DJIA, -1.61% fell 475.07 points, or 2%, to 23,870.65, while the S&P 500 SPX, -1.81% gave up 61.68 points, or 2.1%, to trade at 2,850.75. The Nasdaq Composite COMP, -1.87% was off 186.26 points, or 2.1%, at 8,703.29. NQ00, -1.79%

Stocks ended lower Thursday, but still saw a historically strong April rebound as major indexes took back a chunk of the ground lost in the coronavirus-inspired selloff that took the S&P 500 down nearly 34% from its Feb. 19 record close to its March 23 low.

For the month, the Dow gained 11.1%, while the S&P 500 SPX, -1.81% ended April up 12.7%, representing their best monthly gains since 1987 and the best April performance since 1938, according to Dow Jones Market Data.

The Nasdaq Composite booked a monthly return of 15.5%, its best such advance since 2000 and the best April for the technology-laden index on record, while the Russell 2000 rose 14% for its best month since 2011 and its best April since 2009.

What’s driving the market?

“Two factors are weighing on risk sentiment. Firstly, disappointing earnings announcements/trading updates from Apple and Amazon after the close, with the latter warning of a possible Q2 loss. Secondly, an increase in tension between the U.S. and China and hints at possible additional U.S. tariffs,” said Adam Cole, chief currency strategist at RBC Capital Markets, in a note.

Shares of Dow component Apple Inc. AAPL, +0.91% slumped in early trade, but have since pushed higher, up 1% midmorning Friday.

Analysts said it was the guidance — or lack thereof in the case of Apple — that appeared to unsettle investors, analysts said. Apple reported that profits slipped slightly but sales grew amid the spread of COVID-19, while promising investors billions more in stock repurchases and dividends, but declined to provide an outlook.

Both Apple and Amazon are among the companies that led the S&P 500 index’s comeback from the March 23 lows and were two of the best performers in April. Amazon rallied nearly 27% in April while Apple jumped 15%.

Meanwhile, global equities were pressured after President Donald Trump indicated he may consider imposing import tariffs on China.

The Washington Post on Thursday reported that U.S. officials are beginning to explore proposals for punishing China for its handling of the pandemic, adding to bearish sentiment on Wall Street. The report said some administration officials have discussed having the U.S. cancel part of its debt obligations to China. Asked about that option, Trump said “I could do the same thing but even for more money, just putting on tariffs.”

“Phase one of the U.S.-China trade deal was signed in January, after much toing and froing, to say the least. It is possible we could be in for another prolonged period of tough tariff talk,” said David Madden, market analyst at CMC Markets UK, in a note.

“Some people might think this is just a ploy by Mr. Trump to make himself look good ahead of the Presidential election, but either way it has prompted traders to trim their exposure to stocks,” he said.

Stocks saw little movement after the Institute for Supply Management said its April manufacturing index came in at 41.5%. Economists surveyed by MarketWatch, on average, had looked for the gauge to plunge to 35% from a 49.1% reading in March. A figure below 50 indicates a contraction in activity.

Originally Published on MarketWatch

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