The Dow Jones Industrial Average tumbled more than 350 points Thursday as investors worried that the U.S. and China are headed for a long standoff in their costly trade dispute.
The broad sell-off, which followed a slide in global markets, placed the benchmark S&P 500 index on track for its third straight weekly loss. Traders sought safety in the bond market, driving bond prices higher, which pulled the yield on the 10-year Treasury to 2.30%, the lowest level in more than a year.
The stock market has been highly volatile since Washington and Beijing escalated their dispute over trade earlier this month. The two sides have broken off negotiations and appear set for a long standoff. Investors are concerned a prolonged trade war could stunt economic growth and hurt corporate profits.
“Markets are appreciating how far apart the two sides are and how messy the grand deal would be that both sides had led us to believe was coming very quickly,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.
Trade-sensitive technology stocks again led the losses. Many tech companies do significant business in China, and the Trump administration’s proposed restrictions on technology sales to Chinese companies hit their stocks hard.
Apple fell 2.1%, while chipmakers such as Advanced Micro Devices, Broadcom, Qualcomm and Nvidia each dropped by at least 3%. An S&P index that tracks the chip industry’s performance has plunged about 16% so far this month amid the heightened trade tensions.
Banks also took heavy losses in the sell-off as bond yields fell sharply. Lower yields mean lower interest rates on loans, which makes lending less profitable. JPMorgan dropped 2.5% and Bank of America slid 3%.
Energy stocks slumped as the price of U.S. oil plunged 5.7% to settle at $57.91 a barrel. Benchmark U.S. crude is down 8.1% for the week. Exxon fell 2.6% and Chevron lost 2.7%.
Investors fled to safer holdings. Utilities and real estate were the only sectors showing gains. Utilities are considered less of an investment risk and more money gets shifted into those stocks when investors are concerned about volatility and a slowdown in economic growth.
The U.S. and China concluded their 11th round of trade talks earlier this month with no agreement. Instead, the U.S. moved to increase tariffs on Chinese goods, prompting China to reciprocate. The trade dispute escalated further after the U.S. proposed restrictions on technology sales to China, though it has temporarily backed off.
China is looking for ways to retaliate and has reached out for support from Russia and its neighbors in Asia. Both the U.S. and China have made overtures about continuing trade talks, but none are scheduled.
The resumption of trade hostilities this month has interrupted a market rally that saw the S&P 500 hit a record and wipe out the sharp decline from the fourth quarter of last year. The index is down 4.7% so far in May, though it’s still sporting a gain of 12% for the year.
KEEPING SCORE: The S&P 500 index was down 1.4% as of 3:24 p.m. Eastern Time. The Dow fell 352 points, or 1.4%, to 25,423.93. It had sunk 448 points earlier in the day. The Nasdaq composite dropped 1.7%. The Russell 200 index of small company stocks gave up 2.5%.
Markets in Asia and Europe also saw steep losses.
BRAZIL CALLING: Avon shares rose 3% after Brazilian cosmetics maker Natura announced that it is buying the beauty products company for $3.7 billion in stock.
The deal would create the world’s fourth-largest group of beauty products. Natura also currently owns retail stores like The Body Shop.
ENTICING PROFIT: Victoria’s Secret owner L Brands surged 11.6% after blowing away Wall Street’s first quarter earnings forecasts.
The company, which also owns Bath & Body Works, gave investors a surprise profit on better-than-expected revenue.