Dow plummets, reversing gains from China trade truce

FAN Editor

Last Updated Dec 4, 2018 2:10 PM EST

U.S. stocks tumbled in Tuesday trading in a selling wave that erased the market’s gain from the day before when Wall Street celebrated news of a truce in the U.S.-China trade fight.

The celebration may have been premature, as experts warned that the two countries remain far apart in ironing out key disputes over tariffs as well as protection of technology secrets and intellectual property. President Trump even reminded his Twitter followers Tuesday morning: “I am a Tariff Man.”

Several hours later, the Dow Jones industrial average had sunk 730 points, or 2.8 percent, to 25,095 as of 1:30 p.m. Eastern Time, more than erasing its 488-point gain over the previous two trading days. The S&P 500 and Nasdaq composite indexes also both fell around 3 percent. The Russell 2000 index of smaller-company stocks gave up 3.3 percent Tuesday and now has a loss for the year.

Technology companies, banks and industrial stocks accounted for much of the sell-off as traders moved assets into the relative safety of U.S. government bonds, driving bond yields sharply lower.

The sharp turn in the markets followed a strong rally on Monday fueled by optimism over the news that President Donald Trump and his Chinese counterpart Xi Jinping had agreed at the G-20 summit over the weekend to a temporary, 90-day stand-down in the two nations’ escalating trade dispute.

But the market’s optimism faded Tuesday amid published reports questioning the scant details out of the Trump-Xi talks and growing skepticism that Beijing will yield to U.S. demands anytime soon.

“The actual amount of concrete progress made at this meeting appears to have been quite limited,” Alec Phillips and other economists at Goldman Sachs wrote in a research note.

Willie Delwiche, investment strategist at Baird, echoed those doubts. “The sense is that there’s less and less agreement between the two sides about what actually took place,” Delwiche said. “There was a rally in the expectation that something had happened, the problem is that something turned out to be nothing.”

The trade dispute has rattled markets in recent months as signs emerged that it has begun affecting corporate profits. That’s stoked traders’ fears that if it drags much longer it could further weigh on global economic growth.

The jitters helped drive demand for government bonds Tuesday, pushing prices higher. The yield on the 10-year Treasury note fell to 2.91 percent from 2.99 percent late Monday, a large move. The slide in bond yields, which affect interest rates on mortgages and other consumer loans, weighed on bank stocks. Citigroup fell 5.4 percent to $61.63.

Chipmakers were among the biggest decliners in a technology sector slide. Advanced Micro Devices dropped 9.4 percent to $21.49, while Micron Technology lost 6.4 percent to $37.47.

Apple lost 3.7 percent to $177.99 after the consumer electronics giant was downgraded by HSBC analysts, citing the possibility that iPhone volume and value growth may moderate due to a saturated mobile phone market.

Homebuilders fell after luxury homebuilder Toll Brothers issued a cautious assessment of the housing market. Toll’s shares rose 0.4 percent to $33.67, recovering from a morning sell-off. Hovnanian Enterprises led most builders lower, giving up 10.3 percent to $1.10. 

Stock and bond trading will be closed in the U.S. Wednesday in observance of a national day of mourning for former President George H.W. Bush.

© 2018 CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.

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