New York: Stocks fell sharply on Tuesday as investor optimism around the upcoming U.S.-China trade talks faded. The Dow Jones Industrial Average traded 254 points lower, or 1%. The S&P 500 slid 0.8% along with the Nasdaq Composite.
Bank shares fell broadly. Citigroup, Bank of America and J.P. Morgan Chase slid more than 1% each as rates declined. The benchmark 10-year Treasury yield traded at 1.52%. The S&P 500 industrials sectors pulled back more than 1%, led by declines in Caterpillar and Deere. Boeing also contributed to the losses, sliding more than 1%. Big tech shares such as Face Book, Amazon, Apple and Alphabet declined as well.
It was reported China is toning down its expectations ahead of trade negotiations with the United States. The report said Chinese Vice Premier Liu He — who will lead the country’s trade delegation — will not carry the title of “special envoy,” signaling he has not received any specific instructions by President Xi Jinping. U.S.-China trade talks are set to start Thursday.
The U.S. also expanded its trade blacklist to include some of China’s top artificial intelligence firms on Monday, punishing Beijing for its treatment of predominantly Muslim ethnic minorities. China’s foreign ministry said to “stay tuned” for retaliation following the blacklist expansion.
It was reported the White House is looking to limit Chinese stocks within government pension funds. Alibaba and JD.com U.S.-listed shares fell more than 1.5% each. A container ship berthing at the port in Qingdao, in China’s eastern Shandong province. The White House has scheduled an increase in U.S. tariffs on $250 billion worth of Chinese goods to 30% from 25% on Oct. 15. President Donald Trump has said the tariff increase will take effect if no progress is made in bilateral trade negotiations.
“The U.S.-China trade talks are the clear highlight this week,” said Tom Essaye, founder of The Sevens Report. “Some sort of a trade truce that results in no more new tariffs is the clear market expectation. If that does not occur, this market is at risk of disappointment.”
The world’s two largest economies have imposed tariffs on billions of dollars’ worth of one another’s goods since the start of 2018, battering financial markets and souring business and consumer sentiment.
On the data front, U.S. producer prices posted their biggest drop in eight months in September, dragged down by lower costs for goods and services. Producer prices are an indicator of inflation and a decline could give the Federal Reserve more room to ease monetary policy.