Stocks fell on Thursday, resuming a deep sell-off this week, after President Donald Trump said China “broke the deal” at a rally Wednesday evening, fueling worries the U.S. and China will be unable to hatch a trade agreement before new tariffs go into effect at midnight.
The Dow Jones Industrial Average fell about 400 points on Thursday, while the S&P 500 dropped 1.2% and the Nasdaq Composite lost 1.5%. The Dow is down more than 700 points and the S&P 500 has lost more than 3% this week after Trump threatened to raise tariffs on more Chinese goods over the weekend.
Small-cap stocks fell into correction levels on Thursday, with the Russell 2000 benchmark dropping more than 10% below their intraday all-time high. The group is the most sensitive to fluctuations in the economy and market sentiment because of their small size.
Shares of Intel fell nearly 6% on Thursday after sinking nearly 5% in the previous session as the chipmaker said it sees both revenue and earnings per share growing in the “single digit” percentage range over the next three years. BMO downgraded the stock to market perform from outperform on Thursday, saying it sees the stock “treading water at best.” Other chip stocks fell on trade war concerns.
“By the way, you see the tariffs we’re doing? Because they broke the deal. They broke the deal,” Trump said at a rally in Florida Wednesday evening. “So they’re flying in, the vice premier tomorrow is flying in — good man — but they broke the deal. They can’t do that, so they’ll be paying.”
Liu He, China’s vice premier and top trade negotiator, will dine with U.S. Trade Representative Robert Lighthizer and other U.S. officials Thursday evening in Washington, just hours before the new tariffs are imposed. Liu is not expected to meet with Trump on Thursday, CNBC reported.
China claimed it will retaliate if the higher levies are imposed. Despite Trump’s amped-up rhetoric, the White House claimed on Wednesday China still wants to make a deal, which kept the market temporary afloat for a day.
Thursday is “a pivotal day,” said Ed Mills, public policy analyst at Raymond James, in a note. “We believe Chinese officials will be looking to delay Friday’s tariff increase in order to continue conversations as to the appropriate level of commitments in key areas. However, the market reaction over the last couple days gives Trump some leeway to maintain an aggressive tone.”
The bond market is flashing a recession signal Thursday as trade tensions intensify The yield on the 10-year Treasury note fell below that of the 3-month bill, inverting part of the so-called yield curve. An inversion has been a reliable recession indicator in the past.
Chipmakers, sensitive to higher tariffs, took a hit on Thursday as Nvidia and Micron dropped about 4.4% and 3.5% respectively. The VanEck Vectors Semiconductor ETF is down 7% this week so far, on pace for their worst week of the year. Apple also fell 2.3% and Boeing is down 2.6% Thursday.
Chevron‘s stock rose more than 3% Thursday after the company said it will not submit a new offer to acquire Anadarko Petroleum and will collect a $1 billion breakup fee. The oil major also said it’s increasing share repurchase rate by 25 percent to $5 billion per year.
The Cboe Volatility Index, a measure of the 30-day implied volatility of the S&P 500 known as the “VIX” or the “fear gauge,” hit a fresh high of 23.38 on Thursday, its highest level since January 4.