Dow sinks 800 points as trade truce enthusiasm fades
The Dow dropped as much as 805 points, or 3%, on Tuesday. It was recently down about 700 points.
The S & P 500 declined 2.5%, while the Nasdaq tumbled 3%.
"People are still very concerned about the trade war," said Dan Suzuki, portfolio strategist at Richard Bernstein Advisors. "Financial markets are increasingly showing signs of fear of a recession."
President Donald Trump did not help Wall Street's trade war worries on Tuesday. Trump said that he would "happily" sign a fair deal with China but also left open the possibility that the talks will fail.
"President Xi and I want this deal to happen, and it probably will, "Trump tweeted. "But if not remember … I am a Tariff Man."
These words are not likely to boost confidence among investors already worried about the negative consequences of the trade war. Steel and aluminum tariffs have lifted raw material costs and caused disarray in supply chains. And uncertainty about trade policy makes it very difficult for companies to make investment decisions.
The gap between the 10-year and two-year Treasury yields dropped on Tuesday to the smallest since just before the Great Recession.
"It's playing with fire to be too tight and risk an inversion because you do not know what the outcome will be," Bannister told reporters on Tuesday. "Even if the Fed pauses, they may have already done too much."
A flattening yield curve and slowing economic growth hurt the profitability of banks.
But Suzuki cautioned that the markets could be overreacting. Han pekte på sterke corporate profits og det faktum at rentekurven ikke har invertert.
"We do not see signs of an impending recession," Suzuki said. "There is a widening gap between market fear of a deterioration in the fundamentals and the actual fundamentals themselves."
