Dow Jones futures slashed heavy losses early Monday morning, along with S&P 500 futures and Nasdaq futures, as investors attempt to value in an escalating China trade war, following Friday’s massive stock market declines. After hiking China tariff rates late Friday, President Donald Trump stated Sunday his trade war regret was not raising tariffs higher. Apple (AAPL), maybe the ultimate China trade war stock, will be in focus. So will Boeing stock, Nike inventory, Micron stock, and Tesla stock.
The stock market rally already suffered a sharp sell-off Friday after Trump promised to escalate trade war following Beijing’s early Friday move to raise tariffs on U.S. items. Apple stock tumbled 4.6% Friday, Micron Technology (M.U.) 4.1%, Nike (NKE) 3.4% and Tesla (TSLA) 4.8%. Boeing (B.A.) edged up 0.45% on growing hopes for a 737 Max return to flight but closed close to session lows.
Late Friday, Trump carried out his China trade war threat, saying he would increase present tariffs on $300 billion price of Chinese items to 30% from 25%. He also stated that tariffs on an extra $300 billion in Chinese merchandise, set to take impact Sept. 1, can be 15%, not 10% as beforehand planned.
Buyers might have already priced within the tariffs, but the outlook for the China trade war and the world economy is not promising.
Friday’s big news and stock market response make two issues abundantly clear. One, an inventory market rally cannot thrive when the China trade war escalates. Two, Fed rate cuts cannot offset a China trade war. And in gentle of the prior two factors, that suggests investors ought to take a cautious approach.