US STOCKS-Wall Street plunges as U.S.-China trade war intensifies

Reuters

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    * Trump calls on U.S. companies to exit China
    * China unveils retaliatory tariffs on U.S. goods
    * Powell says will "act as appropriate" to support growth
    * All 3 major U.S. stock indexes post 4th straight weekly
declines
    * Indexes down: Dow 2.37%, S&P 2.59%, Nasdaq 3%

 (Updates to market close)
    By Stephen Culp
    NEW YORK, Aug 23 (Reuters) - Wall Street tumbled on Friday
after the U.S.-China trade war escalated in dramatic fashion,
with President Donald Trump demanding that American companies
seek alternatives to doing business with China after Beijing
announced its own slate of retaliatory measures. 
    All three major U.S. stock indexes ended the session sharply
lower, posting their fourth consecutive weekly declines. 
    The latest exchanges in the long-running tariff row
triggered a broad-based sell-off that hit shares of companies
with high exposure to China the hardest, such as chipmakers and
other top technology names. Dow Jones Industrials components
Intel Corp  INTC.O  and Apple Inc  AAPL.O  dropped 3.9% and
4.6%, respectively.
    The developments overshadowed a highly anticipated speech
from U.S. Federal Reserve Chair Jerome Powell, in which he
reiterated a pledge the central bank would "act as appropriate"
to support the economy, but he stopped short of committing to
the series of rapid-fire rate cuts Trump has been demanding.
    Trump's tweeted response to the speech labeled Powell an
"enemy."
    "(Trump) seems to be irate that China reacted to what the
U.S. has done and is basically having a mini-tantrum and is
angry at everybody," said David Katz, chief investment officer
at Matrix Asset Advisors in New York. "He’s angry at China, he’s
trying to put the blame on the market and the economy on
Powell." 
    "But at this point, it’s very clear ... that the issues that
have been coming to fruition of late with the economy and the
slowdown are all trade-related and have very little to do with
the Fed," Katz added.
    Bernard Baumohl, managing director and chief global
economist at the Economic Outlook Group in Princeton, agreed. 
    "The biggest folly is the belief that lowering interest
rates by 25 or 50 bp will do anything to revive the economy,"
Baumohl said. "Don't ask the Federal Reserve to bail out the
economy, because they're not going to be able to do it this
time." 
    The escalating U.S.-China trade dispute has emerged as a
major tripping point for the market in recent weeks. Friday
marked the third decline of more than 2% for the S&P 500 so far
in August, and the benchmark index has now shed 5.8% in the last
four weeks.  
    Yields for 2-year and 10-year U.S. Treasuries entered
inversion territory, a classic recessionary red flag. The curve
has traded in and out of inversion for the past three days.
 urn:newsml:reuters.com:*:nL2N25J1EN  
    The Dow Jones Industrial Average  .DJI  fell 623.34 points,
or 2.37%, to 25,628.9, the S&P 500  .SPX  lost 75.84 points, or
2.59%, to 2,847.11 and the Nasdaq Composite  .IXIC  dropped
239.62 points, or 3%, to 7,751.77.
    All 11 major sectors in the S&P 500 ended the session in
negative territory. Energy  .SPNY  and technology  .SPLRCT  were
the biggest percentage losers, both sliding more than 3%.
    Trade-sensitive chipmakers dropped on the bellicose trade
rhetoric, with the Philadelphia SE Semiconductor index  .SOX 
dipping 4.4%.  urn:newsml:reuters.com:*:nL2N25J101
    Specialty retailer Foot Locker Inc  FL.N  plummeted 18.9% on
the heels of disappointing second-quarter results.  urn:newsml:reuters.com:*:nL4N25J2TQ
    Computer hardware company HP Inc  HPQ.N  announced the
departure of chief executive officer Dion Weisler and forecast
lower-than-expected fourth quarter profit, sending its shares
down 5.9%.
    Declining issues outnumbered advancing ones on the NYSE by a
4.52-to-1 ratio; on Nasdaq, a 5.27-to-1 ratio favored decliners.
    The S&P 500 posted 33 new 52-week highs and 38 new lows; the
Nasdaq Composite recorded 38 new highs and 195 new lows.
    Volume on U.S. exchanges was 8.07 billion shares, compared
with the 7.58 billion average over the last 20 trading days. 

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S&P 500 drops 1% after Trump threatens to counter China tariffs 
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 (Reporting by Stephen Culp; additional reporting by Lewis
Krauskopf; editing by Chris Reese)
 ((stephen.culp@thomsonreuters.com; 646-223-6076;))

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