Dowen dropped more than 800 points, or 3%, on Tuesday. S & P 500 fell 3%, while Nasdaq doubled almost…
Dowen dropped more than 800 points, or 3%, on Tuesday. S & P 500 fell 3%, while Nasdaq doubled almost 3.5%.
Large technical shares fell sharply. Apple (AAPL), Amazon (AMZN) and Alphabet (GOOGL) lost more than 3%.
But investors quickly realize that the US-China trade war is not over. The tariffs already imposed remain. And new tariffs could be implemented if the two sides fail to make progress.
President Donald Trump emphasized the point on Tuesday. Trump said he would “happily” sign a fair deal with China, but also left the possibility that the conversation will fail.
“President Xi and I want this store to happen, and it’s likely,” Trump tweeted. “But if you do not remember … I’m a Tariff Man.”
Investors have also become concerned about fluctuations in the bond market. The gap between short-term and long-term state tax rates has fallen significantly in the week. Before almost every recession, the return curve has inverted, which means short-term interest rates are higher than long-term.
The gap between the 1
0-year and two-year rates dropped Tuesday to the least since just before the big recession.
The tightening rate reflects the fear of slowing down growth and worries about whether the Federal Reserve is raising interest rates faster than the economy can handle. Fat boss Jerome Powell spoke last week that investors interpreted as signaling the central bank could slow down its increases. However, it is a debate about whether Powell really telegraphed a sudden change.
Barry Bannister, director of institutional equity strategy, predicts that the Fed will pause its price increases as it has already made monetary policy too hard. He pointed to the slowdown in the housing market caused by higher mortgage lending.
“It’s playing with fire to be too hard and risk inversion because you do not know what the outcome will be,” says Bannister to Tuesday’s reporters. “Even if the Fed breaks, they may have already done too much.”
A flat rate of return also tends to damage the profitability of banks as well. The financial sector was the second worst artist in the S & P 500 on Tuesday. Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC) decreased more than 3%.