The Dow plunged 450 points at the open Monday morning after President Donald Trump surprised investors by threatening to impose higher tariffs on China in a late Sunday tweet. But at midday, the Dow bounced back from its initial low, and was down some 170 points. The Dow is still up about 14% this year, but Monday’s plunge at one point wiped out the past three weeks of gains. The sudden escalation of US-China trade tensions deals a major blow to investors’ expectations that Washington and Beijing would reach a trade deal in the near term. Trump’s threats raise the risk of a prolonged fight between the world’s two largest economies. Heavy selling knocked the S&P 500 and the Nasdaq (COMP), which dropped 1.6% and 2.2% at the open. Just like the Dow, they retraced their initially losses, and were down 0.8% at midday. For the year, the S&P remains 18% higher; the Nasdaq has gained about 22%. The VIX, a market volatility index, jumped to its highest level since January. “A big underpinning of the rally was this consensus that a trade deal with China would eventually get done,” said Michael Block, market strategist at Third Seven Advisors. “This tweet may be a tactic but it has bulls unglued and playing what if.” World markets suffered even sharper losses as investors express concern about how tariffs and trade uncertainty will impact China’s already-slowing economy. China’s Shanghai Composite Index (SHCOMP) tumbled 5.6%, its worst one-day drop since February 2016, according to Refinitiv. The Shenzhen-based CSI 300 Index closed 5.8% lower. China’s yuan dropped 0.8% against the US dollar in offshore trading. Hong Kong’s Hang Seng dropped almost 3%. “Shocking escalation — even on Trump standards,” Chris Krueger, analyst at Cowen Washington Research Group, wrote in a note to
Trade turmoil wipes out a chunk of the stock market's recent rally
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