The stock market sank almost 600 points after China appeared to make another move in the escalating tit-for-tat trade dispute with the U.S.
The Dow Jones Industrial Average plunged 594 points, or 2.2 percent percent, to 25,882.83 morning, while the S&P 500 shed 2.3 percent.
Among the retail stocks in the red were J.C. Penney Co. Inc., down 9.3 percent at 66 cents; Vince Holding Corp., 7.8 percent at $12.29; Macy’s Inc., 6.6 percent at $19.88; Abercrombie & Fitch Co., 4.4 percent at $16.75; Tailored Brands Inc., 4 percent at $4.42; and Nordstrom Inc., 3.4 percent at $29.72.
Stocks reacted pretty mildly Friday as traders digested news that President Trump was preparing to hit China with 10 percent tariffs, effective Sept. 1, but the latter allowing the yuan to break through 7 against the dollar for the first time in over a decade, as well as reportedly canceling purchases of U.S. agricultural goods, dramatically shifted the mood Monday.
The currency movements fueled a further war of words between the two superpowers, with Trump tweeting that it was “currency manipulation” and a “major violation,” while Chinese officials issued a statement insisting that it was not a “competitive devaluation.”
“This fluctuation is driven and determined by the market,” People’s Bank of China Governor Yi Gang said. “Whether it is from the fundamentals of the Chinese economy or from the balance of market supply and demand, the current RMB exchange rate is at an appropriate level. Although the RMB exchange rate has fluctuated due to recent external uncertainties, I am confident that the RMB will continue to be a strong currency.”
Analysts at economic consultancy Capital Economics are forecasting that the S&P 500 will fall by another 15 percent between now and the end of this year, as “investors’ lofty expectations for earnings are dashed by continued sluggish growth in the U.S. and elsewhere, which won’t be helped by an escalating trade war.”