U.S. automakers, aero companies, grain merchants, and chipmakers were the early casualties on Wednesday after China and the United States announced tariffs on $50 billion of each other’s imports, cementing fears they were moving towards a trade war.
The speed with which the trade spat between Washington and Beijing is ratcheting up – the Chinese government took less than 11 hours to respond with its own measures – led to a sharp sell-off in global stock markets and commodities.
At 8:02 a.m. ET, Dow e-minis were down 443 points, or 1.85 percent. S&P 500 e-minis fell 35.5 points or 1.36 percent. Nasdaq 100 e-minis dropped 104 points or 1.6 percent.
The malaise was broad-based. Twenty-nine of the 30 Dow Jones Industrial Average components were lower in premarket trading. Nearly 200 of the S&P 500 components were lower. Only three of the most active U.S. stocks premarket were higher.
“It’s tit-for-tat as China retaliates, sending the markets into a tailspin. Today’s decline will likely accelerate the pace of testing the indices yearly lows in the coming days,” said Peter Cardillo, the chief market economist at First Standard Financial in New York.
Worst Impact On Industrials
The stock futures implied the S&P 500 would not only open below its 200-day moving average, a key support level watched by technical analysts, but also challenge its 2018 low from Feb. 9. China levied 25 percent additional tariffs on U.S. goods earlier in the day. But unlike Washington’s list that covers many obscure industrial items, Beijing’s covers 106 key U.S. imports including soybeans, planes, cars, and chemicals.
As has been the case since the trade war fears surfaced, industrials were the worst hit. Shares of Boeing, the single largest U.S. exporter to China, tumbled about 4 percent. Caterpillar fell 3 percent. Automakers Ford, General Motors, Fiat Chrysler and Tesla fell between 2.3 percent and 4.4 percent. Grain merchant Archer Daniels was down 3.3 percent, while Bunge slipped 2.2 percent.
Chipmakers, which have the highest revenue exposure to China among S&P 500 companies, also fell. All components of the Philadelphia chipmakers index trading premarket were lower, with AMD’s 4-percent drop leading.
“As a sector, technology has the most to lose from a world in which global trade is restricted and of course, some of the subjects of the tariffs, will also be hit,” said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.
Investors headed for safer bets. U.S. 10-year Treasury yield was last down 2.5 basis points at 2.76 percent, while gold prices went up nearly 1 percent.
The ADP National Employment report showed U.S. private employers added 241,000 jobs in March, above the 205,000 increase estimated by Reuters. That comes ahead of the more comprehensive March payrolls data on Friday.