Last week was the worst week for U.S. stocks in two years. The Dow Jones industrial average fell 5.7%, the S&P 500 lost 6% and the Nasdaq dropped 6.5%, and some stocks and sectors did worse than that.
Facebook lost almost 14%, following news that data collected from users was used by a consulting company to support Donald Trump’s presidential campaign, without the consent or knowledge of those users. (The consulting company was co-founded by Steve Bannon, former White House chief strategist).
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Apple, which collects more than 20% of its revenue from China and sells millions of smartphones to Chinese shoppers, fell 7.3%, and GE, which has been a big loser this year for multiple reasons including a Securities and Exchange Commission investigation into a $6.2 billion insurance loss that forced it to restate 2016 and 2017 income, lost 8.7%. Among sector funds, the SPDR tech sector fund fell 7.6% while the SPDR financial fund lost 7.1%.
Apple as well as other tech companies and industrial companies which either export to China or import materials from China, or do both, are under pressure from White House plans to impose as much as $60 billion in tariffs on imports from China. Fears of potential retaliation from China are impacting the shares of U.S. exporters to China.
Details about tariffs on China imports haven’t been revealed yet, but Treasury Secretary Steve Mnuchin told Fox News Sunday that Trump intends to impose them unless a deal is reached with Beijing concerning stolen American technology.
By Monday morning, optimism was growing that such a deal would be reached following a report in The Wall Street Journal late Sunday that China and the U.S. have started negotiating on ways to increase U.S. access to mainland Chinese markets.
“The big story for the markets is that we’re simply in a trade dispute, not a trade ‘war’ between the U.S. and China,” wrote Greg Valliere, chief global strategist at Horizon Investments, in his latest Capitol Notes.