U.S. stocks were set to come under pressure again on Friday, with investors unnerved by the prospect of a global trade war as China fired its first retaliatory salvo against tariffs of up to $60 billion announced by the Trump administration.
Investors sought shelter in gold and the Japanese yen, which was trading at its highest levels since the U.S. presidential election in 2016, after one of the worst days for Wall Street in weeks. Asian markets picked up the baton with deep losses and European stocks opened sharply lower.
What are the main benchmarks doing?
Dow Jones Industrial Average futures YMM8, -0.82% tumbled 200 points, or 0.9%, to 23,761, while S&P 500 futures ESM8, -0.63% slid 17.55 points, or 0.7%, to 2,625.75. Nasdaq-100 futures NQM8, -1.13% fell 73.5 points, or 1%, to 6,619.
Major indexes saw their biggest one-day drops since Feb. 8 on Thursday. The Dow DJIA, -2.93% slid 724.42 points, or 2.9%, to end at 23,957.89, and is now 10% below the all-time high hit earlier this year.
With one session left to go, the Dow and S&P 500 are each down nearly 4% for the week and the Nasdaq is facing a loss of around 4.2%. That would mark the worst week for those indexes since the week ending Feb. 9, when markets were routed amid concerns over rising inflation and bond yields.
The Cboe Volatility Index VIX, +7.33% jumped 31% to 23.35, returning back above its long-term average of 20 on Thursday.
What’s driving markets?
Furious over the Trump administration’s plans to impose tariffs on $60 billion worth of Chinese imports, China’s commerce ministry fired back with tariffs against $3 billion in U.S. goods. The Chinese move includes an initial 15% levied on fruit, nuts, wine and stainless steel pipes. A second round of 25% tariffs would be aimed at pork and recycled aluminum would be imposed after China further evaluated U.S. penalties.
Chinese Ambassador to the U.S. Cui Tiankai said on state television that the country would “fight to the end,” in the case of a trade war.
China stopped short of penalties on the biggest salvos in a potential trade war, leaving off soybeans, sorghum and Boeing BA, -5.19% aircraft, indicating Beijing may be looking for leverage in any negotiations with the U.S.
In one bright spot, the White House late Thursday formally approved tariff reprieves for the European Union plus six other nations, including Canada and Mexico.
Elsewhere, the U.S. government narrowly averted another shutdown as the Senate passed a $1.3 spending bill, which will now go to the desk of President Trump for his signature.
What are the data?
On Friday’s data calendar, durable goods orders for February will be released at 8:30 a.m. Eastern Time, along with core capital orders. New home sales for February are due at 10 a.m. Eastern.
Investors will also hear from a trio of Federal Reserve speakers, just two days after the central bank raised U.S. interest rates, but appeared to stick to a more cautious strategy for 2018.
Minneapolis Fed President Neel Kashkari will take part in a discussion about the economy in New York at 10:30 a.m. Eastern, Dallas Fed President Rob Kaplan will appear at the Trellis Foundation Summit at 11:30 a.m. Eastern and Boston Fed President Eric Rosengren will give a speech at the Fed’s international research forum at 7 p.m. Eastern.
What are strategists saying?
“Market participants are trying to gauge the potential toll the tensions between the world’s strongest economies will have on growth and this will be the catalyst for further risk-off sentiment,” said Konstantinos Anthis, researcher at ADS Securities.
What are other markets doing?
The ICE U.S. Dollar Index DXY, -0.12% fell 0.2%, with the dollar hitting its worst levels against the Japanese yen USDJPY, -0.37% since the election of President Trump. Investors seek out the yen and gold in times of economic and political uncertainty. Gold prices GCJ8, +1.12% rose $14.50, or 1%, to $1,341.80 an ounce.
Oil futures CLK8, +0.17% rose 0.7% to $64.81 a barrel.