U.S. Stocks Slide After Trump Signals Further Delays to China Deal

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12/03/2019 | 04:33 pm

By Anna Isaac and Michael Wursthorn

The Dow Jones Industrial Average fell more than 400 points Tuesday after President Trump suggested a trade war with China could continue well into next year as he threatened new tariffs on several more countries.

All 30 stocks in the blue-chip index fell, from tech giant Apple to pharmaceutical company Merck. The index's 1.5% decline would be its first drop of more than 1% since early October, if the losses hold through the closing bell.

Mr. Trump said he had "no deadline" for reaching a trade accord with China during a meeting with the North Atlantic Treaty Organization secretary-general. He added that he liked "the idea of waiting until after the election" to reach a deal.

Investors had expected the U.S. and China to reach a phase one trade deal this month. Such a move would have likely staved off further tariff increases and signaled to investors that the two sides were working to de-escalate tensions after more than a year of contentious negotiations.

Now, that seems less likely, leading investors to pull back from risky assets, such as stocks, and load up again on investments considered safer during periods of economic turbulence, including gold and bonds. Trade tariffs have weighed on corporate profits of manufacturers, tech and other companies all year, and a protracted trade fight will continue to act as a drag on profits, analysts warned.

"It's extremely difficult to base any investment thesis around trade, given how challenging the protagonists are," said Colin Reedie, co-head of global fixed income at Legal & General Investment Management. "It's been a fairly bullish risk environment, and markets are squeezing higher toward the end of the year, so they are a little bit more vulnerable to bad news."

The Dow industrials dropped 417 points to 27366 in recent trading, on pace for its biggest single-day decline since Oct. 2. The S&P 500 declined 1.2%, while the Nasdaq Composite slipped 1.3%.

Shares of Apple pulled the Dow industrials down the most. The tech company fell 2.7%, shaving more than 45 points from the index. Goldman Sachs, Caterpillar, Boeing and 3M all contributed to the Dow's pullback.

The declines reverberated through the stock market Tuesday. Shares of tech, industrial, consumer discretionary, financial, communication and material stocks in the S&P 500 all fell more than 1%.

Shares of utilities and real-estate firms, considered bond proxies for the hefty dividends they pay, meanwhile edged higher, as investors sought less risky investments.

Gold prices rose more than 1% in recent trading, while the yield on the benchmark 10-year U.S. Treasury note fell to 1.762% from 1.835% a day earlier as prices moved higher, according to Tradeweb.

The declines in the U.S. followed pullbacks in other stock markets around the world. The Stoxx Europe 600 was recently down 0.8%, while Japan's Nikkei slipped 0.6%. Hong Kong's Hang Seng also fell, shedding 0.2%.

Tuesday's losses also appeared to factor in Mr. Trump's threat to expand tariffs beyond imports from China. The Trump administration has proposed tariffs of up to 100% against $2.4 billion of French imports in response to a new French tax on some revenue that technology companies in France.

And on Monday, Mr. Trump said he would raise tariffs on steel and aluminum imports from Brazil and Argentina.

"Tariffs will be a part of statecraft from now on," said Geoffrey Yu, head of the U.K. investment office at the wealth-management arm of UBS Group. "There are no allies when it comes to tariffs right now."

Write to Anna Isaac at anna.isaac@wsj.com and Michael Wursthorn at Michael.Wursthorn@wsj.com

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