S&P 500 posts worst week in two years as investors seek safe havens
The S&P 500 Index had its biggest weekly loss in more than two years last week on concerns that a trade war and higher borrowing rates could throttle global growth. The Dow Jones Industrial Average slumped to the lowest since November, led by losses on Friday in companies from manufacturing conglomerate 3M to Goldman Sachs Group.
The S&P 500 dropped to its least since the volatility-fuelled meltdown in early February.
Gold rallied and Treasury yields declined as investors sought safe havens. Global markets moved to lower risk investments after China announced retaliation against US President Donald Trump's proposed tariffs announced on Thursday.
China's ambassador to the US wouldn't rule out the possibility of the Asian nation scaling back purchases of Treasuries in response to the tariffs.
"Investors that have for months relied on Trump's pro-business rhetoric are now caught off guard," said Matt Maley, equity strategist at Miller Tabak & Co. "Trade tariffs are a big change and China's response can even get stronger. There isn't too much to be optimistic about: investors' concern associated with Trump's tariffs isn't going to be resolved neither next week nor the week after."
It's been a miserable week for higher-risk markets globally, as a trade war edged closer, the tech sector was roiled by Facebook's privacy scandal and data showed European growth sputtering. The tech-heavy Nasdaq 100 dropped 7.3pc on the week, the most since 2015.
Traders had already been bracing for the possibility of slowing expansion as the Federal Reserve reiterated its commitment to further interest-rate increases after Wednesday's hike. "There is a tug of war between Fed tightening, fiscal stimulus, strong earning but slowing sales and now tariffs and potential trade wars," said Jason Browne, chief investment strategist at FundX Investment Group.
Adding to the image of the ascendance of the "America first" faction, Trump replaced White House National Security Adviser HR McMaster with John Bolton, a controversial foreign-affairs specialist.