KEEPING SCORE: The S&P 500 index was down 1.2 per cent as of 3:05 p.m. Friday. The Dow Jones Industrial Average fell 308 points, or 1.2 per cent, to 24,861. The Nasdaq slid 1.4 per cent and the Russell 2000 index of smaller companies was 1.3 per cent lower.
Major stock indexes in Europe also fell.
The U.S. stock market’s slump in May reversed a four-month run for the S&P 500 that culminated in an all-time high on April 30. The benchmark index is still up about 10 per cent for the year.
ANALYST’S TAKE: The new tariffs on Mexican goods shocked investors who were already nervous about a global trade war crimping economic growth.
“Clearly the markets were blindsided and completely caught off guard,” said Cliff Hodge, director of investments for Cornerstone Wealth.
The major risk, he said, is that continued trade spats could bring on a global recession. Auto companies and agricultural companies will have a harder time passing costs off to consumers. Also, investors are worried about further escalation of global trade spats.
“The fact that the president is willing to use tariffs as a weapon can really cause damage to business confidence,” Hodge said. “You’ve got to be wondering, who’s next?”
TRADE WAR WOES: The new front in the U.S. trade war will have a wide impact on companies making everything from cars to beer and tacos.
General Motors skidded 3.7 per cent, Ford dropped 2.6 per cent and Fiat Chrysler gave up 4.8 per cent. Those companies import vehicles from Mexico to the U.S.
Railroad operators were also getting squeezed. Kansas City Southern fell 4.6 per cent. The company gets almost half its revenue from Mexico each year. Union Pacific shed 1.6 per cent.
Chipotle fell 2.4 per cent. Rising avocado prices could hurt the