BREAKING NEWS Tommy Tuberville wins Alabama U.S. Senate Republican runoff Full Story

Dow slides 300 points as US tariffs on Mexico amplify trade fears

US stocks retreated on Friday after President Donald Trump surprised Wall Street by opening another front in the trade war.The...

Posted: May 31, 2019 7:04 AM
Updated: May 31, 2019 10:45 AM

US stocks retreated on Friday after President Donald Trump surprised Wall Street by opening another front in the trade war.

The Dow declined 300 points, or 1.2%, on Friday morning following Trump's threat to impose tariffs on Mexico. The S&P 500 fell 1.2% and the Nasdaq lost 1.3%

Trump's vow on Thursday evening to impose tariffs on Mexico, one of America's largest trading partners, only amplifies investor worries about how trade tensions will disrupt business and slow global economic growth. Wall Street was already growing concerned about the escalating trade battle with China.

'This is just the latest worry to put on the fire for investors,' Ryan Detrick, senior market strategist at LPL Financial, wrote in a note to clients. 'The big question at the end of the day though is can we really fight two trade wars at the same time?'

Auto makers, which rely on Mexico as a vital part of their supply chain, fell sharply. Fiat Chrysler lost 5%, while General Motors declined 4% and Ford lost 3%.

'Alarming' decision

Trump said the United States will impose a 5% tariff on all Mexican imports starting on June 10, as a punishment for illegal immigrants crossing the Mexican border into the United States. The White House indicated the tariff would increase by increments of 5 percentage points each month until it reaches 25% in October.

Some analysts expressed concern that Trump is imposing tariffs in response to immigration problems, not economic or trade ones.

'Tariffs can be thrown around as an economic bomb for anything now,' Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote in a note to clients. 'Global growth rates will only continue to suffer.'

Kristina Hooper, chief global market strategist at Invesco, called it an 'alarming' decision by the US administration to open up a 'new and unexpected frontier' by using tariffs as a 'weapon' beyond just trade policy.

'Markets don't like surprises and this is a big surprise,' Hooper wrote in a note.

Peso, Mexican stocks plunge

The tariffs on Mexico will be 'highly disruptive,' Goldman Sachs analyst Alec Phillips wrote in a note to investors Friday. The bank warned the new trade tensions could hurt the ability to enact a new North American trade deal to replace NAFTA.

Investors exited Mexican assets in response to the news.

The iShares MSCI Mexico ETF tumbled 4.5%. The Mexican peso plunged 3% against the US dollar. That sharp currency move should help boost Mexican exports by making goods cheaper for overseas buyers.

Many US companies — including Ford and Walmart rely on the country as a central part of their supply chains.

The country is also a regional manufacturing hub for Japanese, South Korean and German automakers that assemble cars in Mexico and ship many of them to the United States. Shares in Mazda and plunged more than 7%, while losses for Toyota, Honda, Nissan and Volkswagen reached 3% or more.

Investors flock to bonds, gold

Signs of worry abounded on Wall Street.

The CNN Business Fear & Greed Index of market sentiment ticked into 'extreme fear' territory on Friday, compared with 'greed' a month ago.

Cash poured into ultra-safe government bonds, driving the 10-year Treasury yield to 2.17%. The benchmark bond rate briefly plunged below 2.15% for the first time since September 2017. Just a month ago the 10-year yield was sitting at 2.5%.

Gold, which tends to rise when investors are scared, gained nearly 1% and flirted with the $1,300 level.

The VIX volatility index climbed 11%, though it remains well below the levels reached in December.

US oil prices declined nearly 3% to $55 a barrel, driven lower by trade tensions and concerns about excess supply.

Global growth concerns

Beyond the trade front, investors were also unnerved by weak economic numbers overseas.

Activity in China's vast factory industry fell to a three-month low in May. New orders declined, likely reflecting pressure from the trade war.

In Germany, retail sales unexpectedly declined. That sent the German 10-year bond yield plunging deeper into negative territory to a record low.

'We don't want to lose the German consumer,' Boockvar wrote. 'The domestic side is what's kept their economy out of recession.'

Longest weekly losing streak since 2011

The broadside against Mexico comes at a delicate time in global financial markets.

The Dow is on track to close lower this week, for the sixth week in a row. That would be the worst losing streak since summer 2011. With one trading session left, the Dow has fallen nearly 5.4% in May. The last time stocks fell in May was in 2012, when the Do w fell 6.2%. This has been the worst month since December, when the Dow fell about 8.7%

US stocks have slumped and bond yields have plunged in part because of worries about the escalating trade war between the United States and China. Investors fear the tit-for-tat tariffs — and threats of non-tariff retaliation — will slow economic growth, dent consumer confidence and derail business investment.

Imposing tariffs on Mexico may only exacerbate those trade concerns. The US Chamber of Commerce has estimated that about 6 million US jobs depend on trade with Mexico.

Huntsville
Clear
75° wxIcon
Hi: 91° Lo: 68°
Feels Like: 75°
Florence
Clear
73° wxIcon
Hi: 92° Lo: 69°
Feels Like: 73°
Fayetteville
Clear
75° wxIcon
Hi: 91° Lo: 66°
Feels Like: 75°
Decatur
Clear
72° wxIcon
Hi: 88° Lo: 67°
Feels Like: 72°
Scottsboro
Overcast
73° wxIcon
Hi: 87° Lo: 69°
Feels Like: 73°
WAAY Radar
WAAY WAAY-TV Cam
WAAY Temperatures

Alabama Coronavirus Cases

Confirmed Cases: 56441

Reported Deaths: 1136
CountyConfirmedDeaths
Jefferson7012170
Mobile5061140
Montgomery4599112
Tuscaloosa274353
Madison25359
Marshall205012
Shelby176425
Lee164737
Morgan13975
Baldwin134111
Walker111332
Elmore107622
Etowah106914
Dallas10189
DeKalb10017
Franklin95016
Unassigned77728
Autauga71515
Russell7130
Chambers68530
Cullman6686
Limestone6653
Butler65529
Houston6417
Tallapoosa63069
Lauderdale6006
St. Clair5983
Calhoun5545
Colbert5286
Escambia5128
Lowndes49222
Pike4805
Jackson4422
Coffee4364
Covington43512
Talladega4177
Dale4061
Barbour4022
Bullock37810
Hale36323
Marengo36111
Chilton3452
Blount3311
Clarke3236
Wilcox3158
Marion30914
Winston3095
Sumter29713
Pickens2786
Randolph2759
Monroe2683
Perry2552
Conecuh2388
Bibb2271
Macon2229
Choctaw22012
Greene2009
Henry1573
Washington1529
Lawrence1460
Crenshaw1343
Cherokee1317
Geneva1010
Fayette901
Clay892
Lamar891
Coosa671
Cleburne481
Out of AL00

Tennessee Coronavirus Cases

Confirmed Cases: 65274

Reported Deaths: 749
CountyConfirmedDeaths
Shelby14163224
Davidson13976146
Rutherford375539
Hamilton353538
Sumner204056
Williamson193916
Knox171710
Out of TN166012
Trousdale15105
Wilson126117
Putnam10817
Unassigned10772
Bradley10104
Robertson97313
Sevier9244
Montgomery8247
Tipton7177
Lake6960
Macon6467
Bledsoe6311
Bedford6309
Hamblen5084
Maury4993
Hardeman4444
Madison3842
Fayette3805
Rhea3500
Blount3483
Loudon3312
Dyer3023
McMinn29319
Cheatham2873
Dickson2820
Washington2760
Lawrence2506
Sullivan2485
Cumberland2294
Anderson2112
Gibson2031
Jefferson1931
Lauderdale1934
Smith1852
Warren1590
Greene1572
Monroe1566
Coffee1520
Cocke1460
Haywood1413
Hardin1407
Obion1273
Marshall1232
Wayne1230
Franklin1223
Giles1221
McNairy1171
Hickman1120
Carter1082
Marion1014
DeKalb990
Hawkins952
Lincoln950
White933
Roane880
Henderson830
Chester810
Overton791
Weakley791
Claiborne760
Campbell721
Grundy672
Crockett653
Unicoi600
Grainger590
Cannon580
Carroll571
Polk570
Henry540
Sequatchie520
Jackson500
Johnson490
Humphreys482
Perry430
Meigs400
Decatur350
Morgan341
Fentress290
Scott290
Union280
Stewart270
Clay230
Houston230
Moore230
Benton161
Hancock120
Lewis120
Van Buren90
Pickett80

 

 

Community Events