Dow Jones Industrial Average Drops as China Signals Payback for Tariffs – Barron's

Illustration by Michael George Haddad

Recession Alert. All three major stock market indexes closed in the red on Wednesday as trade war concerns and an inverted yield curve spooked investors about recession risks ahead. Chinese newspapers warned in strongly worded commentaries that Beijing is ready to weaponize so-called rare earth metals in the trade war with the U.S. In today’s After the Bell, we…

wonder what else the U.S. and China could use as a weapon in the trade war; look at the warning signs in the Treasury market; and speculate where the market might go next after breaking a key support threshold.

Earth and Oil

Stocks continued to drop as trade headlines kept deteriorating. The Dow Jones Industrial Average dropped 221.36 points, or 0.87%, to close at 25126.41. The S&P 500 fell 19.37 points, or 0.69%, to close at 2783.02. And the Nasdaq Composite lost 60.04 points, or 0.79%, to finish at 7547.31.

Expectations that a trade deal can be reached in the near-term are quickly dissipating, and investors are now watching for what else could get caught in any escalation between the U.S. and China.

Chinese President Xi Jinping’s visit to a rare earths plant last week had sparked speculation that Beijing would use rare earth metals—a group of 17 chemical elements used in everything from high-tech consumer electronics to military equipment—as a weapon in the trade war.

Although China hasn’t explicitly said it would restrict U.S. access to the obscure materials, commentaries from Chinese media on Wednesday strongly implied the possibility. China is the global leader in rare earth minerals and a major exporter to the U.S. If supplies of the metals shrink and

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