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U.S. Stocks, Bond Yields Fall on Trade Tensions

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08/23/2019 | 12:27pm EDT

By Gunjan Banerji

U.S. stocks slumped Friday on escalating trade tensions after China said it would impose retaliatory tariffs on additional U.S. products and President Trump vowed to respond.

The Dow Jones Industrial Average dropped about 450 points, or 1.7%, putting a halt to a relatively quiet week for markets. Yields on U.S. government bonds also tumbled, as did commodities markets, such as oil and copper, that are sensitive to the two countries' trade battle.

"The timing of it is remarkable," said John Brady, managing director at futures brokerage R.J. O'Brien & Associates, of the trade developments. "It puts tariffs front and center on a very important day for markets."

The losses accelerated after President Trump fired off a series of Tweets in response to China's plan to impose tariffs on $75 billion more in U.S. goods.

"We don't need China and, frankly, would be far better off without them, " he said on Twitter while ordering U.S. companies to start looking for alternatives to producing in China.

The trade tensions overshadowed a highly anticipated speech from Federal Reserve Chairman Jerome Powell in Jackson Hole, Wyo.

Mr. Powell said uncertainty over trade policy was "playing a role in the global slowdown and in weak manufacturing and capital spending in the U.S." He also said the Fed would act accordingly to "sustain the expansion" and led some investors to increase expectations of an interest rate cut at the next meeting.

President Trump criticized Mr. Powell in Friday's tweets, saying "the Fed did NOTHING."

"This is going to be ping-pong for awhile," said Sean O'Hara, president of the ETF division at Pacer Financial Inc. "That's what we're going to continue to see until we get a resolution, if we ever do. It's probably going to drive the short-term ups and downs of the market."

Auto makers such as General Motors and Ford Motor fell about 2.1% and 2%, respectively, underperforming the broader stock market.

The yield on the 10-year Treasury note hovered at 1.540% in recent trading, according to Tradeweb, compared with 1.613% Thursday.

U.S. crude oil dropped 3.1% to $53.65 a barrel.

Friday's moves in stocks came a day after a series of weak manufacturing data around the world raised concerns about a possible recession, weighing on U.S. indexes.

Caitlin Ostroff contributed to this article.

Write to Gunjan Banerji at Gunjan.Banerji@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL 0.13% 27147.08 Delayed Quote.16.22%
NASDAQ 100 0.00% 7888.556213 Delayed Quote.24.69%
NASDAQ COMP. -0.11% 8177.391593 Delayed Quote.23.23%
S&P 500 0.03% 3006.73 Delayed Quote.19.94%
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