US stocks have dropped as signs of deteriorating trade relations between the United States and China added to economic worries due to the coronavirus pandemic.
US President Donald Trump’s administration moved to block semiconductor shipments to Huawei Technologies from global chipmakers.
China was swift to respond with a report saying it was ready to put US companies on an “unreliable entity list,” according to the Global Times.
China’s countermeasures include launching investigations and imposing restrictions on US companies such as Apple Inc, Cisco Systems Inc, Qualcomm Inc, as well as suspending purchase of Boeing Co planes, the report said, citing a source.
Boeing fell 2.5 per cent, the most among the constituents of the Dow Jones index, while Apple was down 1.4 per cent,.
Trade-sensitive chipmakers also declined, with the Philadelphia chip index losing 2.4 per cent.
The ratcheting up of China-US tensions comes a day after Trump signalled a deterioration of his relationship with China over the virus outbreak, saying he has no interest in speaking to President Xi Jinping right now and going so far as to suggest he could even cut ties with officials in Beijing.
“The overarching concern that we’ve had as this epidemic has worked its way around the globe is that US-China relations are heading in the wrong direction and that can cause a worse economic effect than the pandemic itself,” said Art Hogan, chief market strategist at National Securities in New York.
After a strong rally from their 2020 lows, the three major stock indexes are on course for their worst week since mid-March, as sobering comments on the pandemic from major US officials pointed to a longer period of economic weakness.
Meanwhile, economic data continued to paint a grim picture with the latest batch of reports indicating US retail sales and manufacturing output endured record declines in April as the virus-led slump seeped into the second quarter.
In early trading the Dow Jones Industrial Average was down 64.04 points, or 0.27 per cent, at 23,561.30, the S&P 500 was down 9.83 points, or 0.34 per cent, at 2,842.67 and the Nasdaq Composite was down 40.51 points, or 0.45 per cent, at 8,903.21.
Eight of the 11 major S&P sectors were lower with real estate and utilities posting the biggest percentage declines. Healthcare, consumer staples and energy stocks were the only ones higher.
Abbott Laboratories slipped 1.4 per cent after the US Food and Drug Administration said the company’s speedy coronavirus test could potentially be inaccurate, but can still be used to test patients.
Declining issues nearly matched advancers on the NYSE and the Nasdaq.
The S&P index recorded three new 52-week highs and no new low, while the Nasdaq recorded 22 new highs and seven new lows.