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Dow Frantically Searches for Silver Lining After China Shocks White House

Sam Bourgi
Last Updated September 23, 2020 12:42 PM

By CCN.com: The Dow and broader U.S. stock market frantically searched for a silver lining on Friday after China threatened harsh retaliation in response to a sizable tariff increase by the White House that took effect just hours ago.

Dow, S&P 500 Extend Brutal Slide

All of Wall Street’s major indexes declined sharply through the Friday morning session. The Dow Jones Industrial Average fell 143.47 points or 0.56% to 25,684.89 as Wall Street grappled with a suddenly-reignited trade war. The S&P 500 slid 0.59% to 2,853.91, while the Nasdaq underperformed with a 0.69% plunge to 7,855.63.

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The Dow careened toward another vicious loss on Friday. | Source: Yahoo Finance

Friday’s stock market sell-off followed a similar plunge on May 9, which saw the Dow Jones Industrial Average fell by as much as 450 points before paring losses. It closed down 138.97 points, or 0.5%, at 25,828.36.

The broad S&P 500 Index of large-cap stocks declined 0.3% to settle at 2,870.72. Most major sectors reported declines, with materials companies shouldering the heaviest losses.

Meanwhile, the technology-focused Nasdaq Composite Index declined 0.4% to 7,910.59.

The CBOE Volatility Index, commonly known as the VIX, flashed a dire warning sign on the bull market Thursday. The so-called “fear index” surged more than 20% and peaked at 23.38, its highest since early January. It would later give back all of its gains to settle in the low-19 region.

A VIX reading in the 20-25 range is consistent with the historical average. Anything above that paints an overwhelmingly bearish picture for stocks.

China Retaliates Against Trump Tariff Threat

xi jinping, china, dow jones
U.S.-China trade negotiations sour at the worst possible time, placing intense pressure on the Dow. | Source: AP Photo / Andy Wong

China has taken a hard line in its ongoing trade negotiations with the United States after President Trump threatened to impose higher import duties on Chinese goods.

According to The Wall Street Journal , China’s hardened stance surprised White House officials at a critical juncture in negotiations.

Trump’s Sunday Twitter tirade, where he threatened to impose import duties of 25% on $325 billion of Chinese goods, came after one of his top trade advisers complained that Beijing had reneged on a trade deal. China says its tone changed because the U.S. appeared ready to make important concessions.

On Thursday, a Chinese Commerce Ministry spokesperson issued the following statement , which was conveyed via the official Xinhua News Agency:

“The escalation of trade friction is not in the interest of the people of the two countries and the people of the world … The Chinese side deeply regrets the action. If the U.S. tariff measures are implemented, China will have to take necessary countermeasures.”

Click here for a real-time Dow Jones Industrial Average chart.