Wall Street plunges as trade war between US and China intensifies

NEW YORK (Reuters) – Wall Street fell on Friday after the trade war between the US and China intensified dramatically. President Donald Trump has asked American companies to find an alternative to their trade relations with China after Beijing announced its own series of retaliatory measures.

The three major US stock indexes ended the session sharply lower, registering their fourth consecutive weekly decline.

The latest trades in the long-standing tariff category led to a widespread sell-off in the shares of companies with high exposure to China, such as chip makers and other big names in technology. Components of Dow Jones Industrials, Intel Corp. and Apple Inc. dropped 3.9% and 4.6%, respectively.

The events eclipsed the much anticipated speech of US Federal Reserve Chairman Jerome Powell, in which he reiterated a commitment that the central bank would "do the right thing" to support the economy, without, however, going to the rescue. engage in the series of rapid rate reductions. Trump was demanding.

Trump's response to the tweet to the speech described Powell as an enemy.

"(Trump) seems to be furious that China has reacted to what the United States has done and is basically making a mini tantrum and angry at everyone," said David Katz, director investments at Matrix Asset Advisors in New York. "He is angry against China, he is trying to blame the market and the economy on Powell."

"But at this point, it is very clear … that the problems that have recently materialized with the economy and the slowdown are all trade-related and have very little to do with the Fed," said Katz.

Bernard Baumohl, Chief Executive Officer and Chief Economist at the Princeton Economic Outlook Group, agreed.

"The biggest craze is to believe that lowering interest rates by 25 or 50 basis points will do everything to revive the economy," Baumohl said. "Do not ask the Federal Reserve to bail out the economy because it will not be able to do it this time."

The escalation of the US-China trade dispute has become an important starting point for the market in recent weeks. Friday, the month of August marked the third decline of more than 2% for the S & P 500, and the benchmark has now lost 5.8% over the past four weeks.

US 2 and 10-year Treasury yields entered the inversion territory, a red flag in a classic recession. The curve is inverted and has been reversed in the last three days.

The Dow Jones Industrial Average lost 623.34 points, or 2.37%, to 25,628.9, the S & P 500 lost 75.84 points, or 2.59%, to 2,847.11 and the Nasdaq Composite lost 239.62 points, or 3%, to 7,751.77.

The 11 main sectors of the S & P 500 ended the session in negative territory. Energy and technology were the biggest losers, both falling more than 3%.

Trade-sensitive chip makers have dropped bellicose rhetoric, with the Philadelphia SE Semiconductor index plunging 4.4%.

Foot Locker Inc., a specialty retailer, fell 18.9% after disappointing results in the second quarter.

HP Inc., a computer hardware company, announced the departure of CEO Dion Weisler, and is forecasting lower than expected fourth quarter earnings, dropping its shares by 5.9%.

Declining issues outnumbered NYSE rising issues by 4.52 to 1; on the Nasdaq, a ratio of 5.27 to 1 favored the decline.

The S & P 500 has recorded 33 new highs over 52 weeks and 38 new lows. Nasdaq Composite recorded 38 new highs and 195 new lows.

The volume of US trade amounted to 8.07 billion shares, against 7.58 billion on average over the last 20 trading days.