Stock Market Overview – Stock Drop on New Tariff Annoucment

Stock prices whipsawed with the Dow initially surging more than 300-points and then tumbling in the afternoon after US president Donald Trump said that he was announcing a new tariff on Chinese goods. Energy shares were under significant pressure as crude oil prices tumbled more than 7%. Sectors were mixed, with Utilities bucking the trend. Semiconductor stocks were also on the defensive, along with retail shares.

The divergence in US economic activity is pronounced. While jobs data continues to be strong, manufacturing data, is softening. The global economic slowdown is weighing on this space, but consumers remain active, since most people who want jobs have jobs. Thursday’s worse than expected ISM manufacturing report shed light on national industrial output. US manufacturing activity slowed to a near three-year low in July and a measure of new orders received by factories rebounded slightly, as the negative effects of a bitter trade war between the United States and China lingered.

The Institute for Supply Management reported that its index of national factory activity slipped to 51.2 last month, the lowest reading since August 2016, from 51.7 in June. It was the fourth straight monthly decline in the index. Expectations were for the ISM index would rise to 52.0 in June. The ISM survey’s new orders measure rebounded to a reading of 50.8 last month from 50.0 in June. A gauge of factory employment dropped to 51.7 from a reading of 54.5 in June.

Trump Announced Tariffs

Riskier assets whipsawed along with gold as the surprise tariffs President Donald Trump announced Thursday against $300 billion or so of Chinese goods takes the trade dispute between the two countries to a new level. The president’s announcement jolted markets, which had bounced back sharply off Wednesday’s disappointing Fed rate cut only to have their legs cut out from underneath by news of a heightened trade war. Trump’s move means that all Chinese goods entering the U.S. will be subject to some sort of duties.