The major U.S. stock indexes fell sharply on Monday in reaction to worries about a trade war, and fears that the tech industry is going to fall under the scrutiny of the federal government which usually means more regulation. Investors were also rattled after President Trump linked his proposal to build a boarder wall between the U.S. and Mexico to ongoing NAFTA negotiations between the two countries.
In the cash market, the benchmark S&P 500 Index settled at 2581.88, down 58.99 or -2.23%. The blue chip Dow Jones Industrial Average finished at 23644.19, down 458.92 or -1.90% and the tech-based NASDAQ Composite closed at 6868.99, down 194.45 or -2.83%.
According to China’s finance ministry, China imposed extra tariffs of up to 25 percent on 128 U.S. products including frozen pork, as well as on wine and certain fruits and nuts, in response to U.S. duties on imports of aluminum and steel.
The tariffs, which took effect on Monday, matched a list of potential tariffs on up to $3 billion in U.S. goods published by China on March 23.
The news drove down demand for higher risk assets because investors expect China’s retaliation to have a negative impact on the economy. Additionally, it may also drive down future earnings.
Shares of Facebook, Netflix, Alphabet and Amazon closed sharply lower on Monday. Investors are selling Facebook because of the negative impact over how it handles data collected from its users. Amazon has been under pressure since last week when President Trump attacked the company, saying it was scamming the U.S. Postal Service.
Weakness in shares of Intel helped push the Dow to its lows for the session. The selling was fueled by a report that Apple would use its own chips for Mac Computers rather than Intel Chips.
In other news, U.S. factory activity slowed in March amid a decline in new orders, but growth in the manufacturing sector remained underpinned by strong domestic and global economies.
On Monday, the Institute for Supply Management (ISM) said its index of national factory activity fell to a reading of 59.3 last month from 60.8 in February. Economists were looking for a reading of 60.1.
Construction Spending edged up 0.1 percent in February after coming in unchanged in January. Economists had forecast construction spending accelerating 0.5 percent in February. Construction spending increased 3.0 percent on a year-on-year basis.
U.S. financial markets showed little response to the data.
Forecast
The major U.S. stock index futures contracts are trading slightly better early Tuesday. At 0611, June E-mini S&P 500 Index futures are trading 2581.75, up 6.75 or +0.26%. June E-mini Dow Jones Industrial Average futures are at 23563, up 12 or +0.05% and the June E-mini NASDAQ-100 Index is at 6409.75, up 17.00 or +0.27%.
In Asia, stocks were weaker but the selling pressure did not match that in the U.S. the previous session. European equities are set to open mixed on Tuesday.
There are no major U.S. economic reports on Tuesday. Also note that Facebook CEO Mark Zuckerberg is not going to testify before Congress on Tuesday as previously reported. Instead, his testimony has been moved to Tuesday, April 10.
His testimony will be important because there are reports that the U.S. is looking for new ways to regulate the social media giant which includes higher fines for data breaches.
In the meantime, investors will continue to react to the movement in shares of Facebook as well as Amazon.com which also faces the wrath of the Federal government.
There are also reports that Trump is considering further tariffs which he may announce on Friday.