Stocks Sink Monday as Trump’s Tariff Threat Comes at Vulnerable Moment

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Stocks fell Monday, as President Trump is threatening new tariffs on Chinese goods. The move into safety has been on in the market of late, as other risks pertaining to coronavirus and the economy remain. 

All three major U.S. indices fell, with the S&P 500 down as much as 1%. The 10 year treasury yield rose to 0.63% from 0.62%, as the price of the safe bond has risen with stocks since the end of March. The move into safety for the past week or so has been more into cash and gold, which rose 0.7% Monday. 

White House officials tell Reuters and other newswires that Trump is planing more tariffs on China, which the market will view as a set backwards from the phase one trade agreement China and the U.S. reached in January. The threat is said to be a retaliation against China’s handling of the virus outbreak. 

"While investors are already bombarded with weak economic data and bad corporate results as a result of a strict global economic lockdown due to the coronavirus crisis, throwing renewed trade tensions will only serve to further dash investors’ hopes of a healthy global recovery once the crisis is over,” wrote Ipek Ozkardeskaya in emailed remarks to reporters. 

Indeed, the market had been grappling with high stock valuations against several virus-related risks: lockdowns may ease slowly or they may cause a second wave of infections. Or a second wave of infections may emerge independent of lockdown policy. The S&P 500 is down almost 5% since Thursday.

Earnings estimates for 2020 have only fallen and stocks re pricing in a 2021 rebound, but investors will have to monitor the economic and earnings fallout from 2020 as they assess 2021. 

Earnings are still making their way through and most companies have withheld guidance on lack of visibility, which the market had anticipated and looked through. 

Leading stocks Monday were classic defensive consumer staples, Walmart  (WMT) - Get Walmart Inc. Report and PepsiCo  (PEP) - Get PepsiCo, Inc. Report, both down 0.5%.  

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