NEW YORK (Reuters) – U.S. stocks dropped on Friday, putting the S&P 500 on track for its first monthly drop of the year after President Donald Trump’s surprise threat of tariffs on Mexico fueled fears increasing trade wars could lead to a recession.
Washington will impose a 5% tariff from June 10, which would then rise steadily to 25% until illegal immigration across the southern border was stopped, Trump tweeted late on Thursday.
Mexican President Andres Manuel Lopez Obrador responded by urging his U.S. counterpart to back down.
“Mexico would probably like to work something out but I don’t think they even know what to work out,” said Tim Ghriskey, Chief Investment Strategist at Inverness Counsel in New York.
“It’s impossible to handicap Trump because something can come out of left field like this and something can go away just as quickly.”
The Dow Jones Industrial Average fell 315.97 points, or 1.26%, to 24,853.91, the S&P 500 lost 33.82 points, or 1.21%, to 2,755.04 and the Nasdaq Composite dropped 97.59 points, or 1.29%, to 7,470.12.
Wall Street’s main indexes are down more than 6% in May, as investors have become increasingly worried about deteriorating trade talks between the U.S. and China trade war and have sought safety in government bonds. Technology and energy have been among the hardest hit sectors since May 3 as Trump ramped up tariff threats with Beijing.
U.S. Treasury yields fell to new multi-month lows. Benchmark 10-year yields dropped as low as 2.145 percent, the lowest since September 2017.
The yield curve, as measured in the gap between three-month and 10-year bond yields, remained deeply inverted. An inversion in the yield curve is seen by some as an indicator that a recession is likely in one to two years.
Of the 11 major S&P sectors, only