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Why The Stock Market Exodus Has Only Begun

Why The Stock Market Exodus Has Only Begun

In response to USA trade tariffs, China on Friday unveiled new import levies targeting American-made products.

US stock index futures were lower on Friday, continuing a sell-off on Wall Street a day earlier due to the rising threat of a global trade war after President Donald Trump moved to impose tariffs on up to $60 billion of Chinese goods. The Dow shed 1,100 points in the last two trading days and was down 5.7 percent for the week. The benchmark index also nudged closer to its February low, which marked a correction, ending 9.9 percent lower than its January 26 record.

Investors kept buying bonds, sending prices higher and yields lower.

As President Trump signs executive orders such as new tariffs of at least $50 billion on Chinese imports, investors feel their fears have been confirmed.

Benchmark U.S. crude oil shed 87 cents, or 1.3 percent, to $64.30 a barrel in NY. To add to this week's woes, the Federal Reserve announced an increase in the benchmark lending rate by a quarter point, expecting a steeper path of hikes over the next two years on an improving economic outlook.

"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.

The S&P's financial sector.SPSY was the S&P's biggest percentage loser, at 3 percent, after a volatile session in which it was whip-sawed by volatile Treasury yields.

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"Trump's tariff plans have created uncertainty and put global stock markets under pressure", says Nigel Green, founder and CEO of deVere Group, a United Kingdom -based investment firm. The Nasdaq composite fell 61 points, or 0.8 percent, to 7,107.

The Dow Jones Industrial Average rose 130 points, or 0.6%, at 24,097 the S&P 500 index advanced 0.4% at 2,655, while the Nasdaq Composite Index gained 0.3% at 7,190. For the smaller companies in the S&P 600 index, it's just 19.5 percent.

The Cboe Volatility Index.VIX, the most widely followed barometer of expected near-term volatility in the S&P 500, finished up 1.53 points at 24.87, its highest close since February 13.

China holds $1.2 trillion in Treasuries, roughly 19 percent of foreign holdings of U.S. government securities, according to government data.

The Nasdaq fell 2.4 percent Friday, losing 6.5 percent on the week, weighed down by fading technology stocks. Investors later booked profits to leave the yen up 0.1 percent at 105.19 yen per dollar.

And while the president has repeatedly touted the success of his policies by pointing to the soaring stock market, the blue-chip Dow Jones Industrial Average has lost 3,000 points since it peaked three months ago.

West Texas Intermediate oil closed at an eight-week high, rising 2.5% to $65.88 a barrel.