U.S. stocks fell sharply on Thursday, pressured by worries of a potential trade war and a decline in tech shares. The broader market was also pressured by a decline in bank stocks.
The Dow Jones industrial average dropped 500 points, with Caterpillar, 3M and Boeing as the biggest decliners. The S&P 500 fell 1.7 percent, with tech and financials dropping more than 2 percent. The Nasdaq composite pulled back 1.9 percent.
Stocks hit their lows of the day after The New York Times reported John Dowd resigned as Trump’s lead lawyer in special counsel Robert Mueller’s investigation.
The Trump administration is set to announce later on Thursday tariffs designed to punish China for intellectual property theft. Some reports indicate the administration will slap $50 billion in tariffs to Chinese goods.
Equities have been under pressure recently as the Trump administration ramps up a protectionist trade agenda. Earlier this month, President Donald Trump announced the implementation of tariffs on steel and aluminum imports, raising concerns about a potential trade war.
Boeing dropped 3.8 percent, while shares of Caterpillar and 3M pulled back 3.4 percent and 3 percent, respectively.
“You could see more pressure [on stocks] if the trade issue” grows, said Bruce McCain, chief investment strategist at Key Private Bank. “The question is: What is the reality of that happening? Most agree this could hurt the economy.”
On Thursday, the 10-year Treasury yield posted its biggest one-day drop since September of last year as investors bid up bond prices, while gold futures gained 0.6 percent. Treasurys and gold are seen as safer assets to hold than stocks.
Bank stocks, meanwhile, fell along with Treasury yields. The SPDR S&P Bank ETF (KBE) fell 2.6 percent, while Citigroup, J.P. Morgan Chase and Bank of America all traded lower.
The Cboe Volatility index (VIX), widely considered the best gauge of fear in the market, briefly rose above 21.
Losses in tech also helped stocks fall. Tech shares have been under pressure lately amid a sharp decline in Facebook shares. News broke recently that data research firm Cambridge Analytica gathered data from 50 million Facebook profiles without the permission of its users. Shares of Facebook have been under pressure all week, sliding 8.5 percent through Wednesday’s close. On Thursday, they fell 2.8 percent.
Facebook CEO Mark Zuckerberg broke his silence over the news, telling CNN it had been “a major breach of trust, and I’m really sorry that this happened.”
The news raised concern that U.S. lawmakers could draw up regulation on data usage for Facebook and other major tech companies.
“They’re not going to write the regulation just for Facebook, said Shawn Cruz, manager of trader strategy at TD Ameritrade, noting regulators are going to target the entire sector. “That could turn into a headwind for these stocks.”
The PowerShares QQQ Trust (QQQ), which tracks the tech-heavy Nasdaq 100 index, dropped 1.9 percent, breaking below its 50-day moving average, a key technical level. Google-parent Alphabet fell 3.2 percent and dipped into correction territory. Tech companies are also among the companies that could be in the cross-hairs of a U.S.-China trade war.
Investors also digested the U.S. Federal Reserve’s latest monetary policy decision. As widely expected by the markets, the Fed raised interest rates by 25 basis points on Wednesday and upgraded its economic outlook, saying that economic activity and jobs gains had been strong in recent months.
Market watchers expect the central bank to hike three times in 2018, while the Fed announced that it was increasing its rate-hike forecast for 2019. Following the announcement, Treasury yields rose with the benchmark 10-year yield briefly topping 2.9 percent, but gave back those gains on Thursday.
—CNBC’s Jeff Cox contributed to this report