U.S. stocks fell in midday trading on Monday, opening the third quarter of 2018 on a negative note as trade tensions between the U.S. and its major trading partners continued to show signs of escalating.
The day’s losses were widespread, with 10 of the 11 primary S&P 500 sectors down. Trading was volatile, with the technology sector erasing an early rise, while the biggest losses came in the materials and energy sectors.
What are the main benchmarks doing?
The Dow Jones Industrial Average DJIA, -0.29%[1] fell 138 points, or 0.6%, to 24,134. The S&P 500 SPX, -0.15%[2] lost 12 points to 2,706, a decline of 0.4%. The Nasdaq Composite Index COMP, +0.25%[3] dropped 20 points, or 0.3%, to 7,490.
Trading may be volatile this week, as some market participants will be out of the office for the Fourth of July holiday, for which markets will be closed on Wednesday. Lower trading volume can exacerbate day-to-day swings.
Read: Which markets are closed for July Fourth?[4]
What’s driving markets?
Recent trading has been driven by uncertainty over trade policy, with investors seeking clarity about potential protectionist changes to U.S. policies and how they could be met by retaliatory measures. A trade war is seen as providing a significant headwind to global growth.
On Sunday, President Trump said he sees his threat to impose global auto tariffs as his biggest weapon[5] to extract concessions from trading partners. At the same time, he called the EU “as bad as China” in hindering U.S. trade.
Meanwhile, a Financial Times report[6] on Sunday said the European Union has threatened $300 billion in fresh tariffs against U.S. products if Trump follows through on his threatened 20% levies targeting the trade bloc’s auto makers. And Canadian retaliatory tariffs took effect Sunday[7], with those measures serving as a response to U.S. metals tariffs.
In another significant question mark, Axios reported that the Trump administration had crafted a draft bill[8] that would declare America’s abandonment of World Trade Organization rules. This would essentially give Trump a license to raise tariffs at will, without congressional consent and largely outside of the international rules governed by the WTO.
Don’t miss: Trade-war fears? These lower-risk stocks are weathering the market storms[9]
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