New York stock indexes dropped two per cent or more Monday, as investors continued to deal with the fallout of the China-U.S. trade war.
The Dow Jones industrial index was off 600 points or 2.3 per cent at midday to 25,884, while the broader S&P index fell 60 points or 2.1 per cent to 2,871. The tech-heavy Nasdaq, which is more sensitive to trade with Asia, was off 2.7 per cent or 214 points to 7,789.
Canada’s TSX index was not trading because of the August Civic holiday.
The price of oil also declined amid fears of depressed demand because of the trade war. West Texas Intermediate crude fell 95 cents to $ 54.79 US a barrel.
Just 10 days ago, U.S. stocks were trading at record levels, but the Trump administration’s threat to impose more 10 per cent tariffs in September on $ 300 billion US of Chinese imports has knocked back markets around the world.
On Monday, China allowed its currency to decline below the politically sensitive level of seven yuan to the U.S. dollar.
Market forces usually would act to drive down the yuan in response to U.S. actions against Chinese goods, but China’s central bank previously has been allowing the currency to hold its value so as not to further inflame trade tensions.
Investors are interpreting Monday’s fall in the yuan as a new front in the trade war and are worried about a global economic slowdown as a result of the trade war.
The all-important American consumer stands to suffer as a result of tariffs and that could further threaten U.S. growth. The latest round of tariffs on Chinese goods would cost U.S. households an average of $ 200 a year, some economists estimate, and would start to bite consumers and retailers just as the holiday shopping season begins.
That cost would come on top of the roughly $ 830 cost imposed per household from Trump’s existing tariffs, according to a New York Federal Reserve analysis.
Technology stocks took the worst hit in the early going as many of those companies stand to suffer more than other sectors if the trade war between the U.S. and China continues to escalate. Apple fell three per cent and Microsoft fell 2.4 per cent.
Investors fled to less risky holdings. Bond prices spiked and pushed yields on the benchmark 10-year Treasury down to 1.77 per cent from 1.85 per cent on Friday.