The Dow Jones Industrial Average tumbled more than 470 points Tuesday amid a broad sell-off on Wall Street as the U.S. and China moved closer to an escalation of their already costly trade war.
The U.S. was set to impose higher tariffs on China on Friday, a day after representatives from both nations are scheduled to resume trade talks in Washington. Trump administration officials accused China of reneging on commitments made during weeks of negotiations.
Both sides had signaled progress was being made toward a resolution in recent weeks. Buoyed by those signs, as well as a more dovish stance on interest rates by the Federal Reserve and better signs on the economy, investors had furiously bought stocks and pushed the S&P 500 and Nasdaq to all-time highs last week. All major indexes still have double-digit gains for the year.
Analysts said the market was vulnerable to any reversals in the trade talks. This week investors have dumped shares of companies that bring in significant revenue from China, such as those in the technology and industrial sectors. Banks have also taken heavy losses.
“This is a game of poker and the U.S. is playing their hand,” said Doug Cote, chief market strategist at Voya Investment Management. “Let’s say the worst happens and they raise tariffs on Friday, well you’re going to get another buying opportunity.”
Every sector fell. Utilities, normally safe-play holdings for investors, fared better than the rest of the market. Bond prices also rose as investors sought out other ways to reduce risk.
The S&P 500 index slumped 48.42 points, or 1.7 percent, to 2,884.05. The Dow lost 473.39 points, or 1.8 percent, to 25,965.09. The index had been down 648. The Nasdaq composite, which is heavily weighted with technology stocks, fell 159.53 points, or 2 percent, to 7,963.76.
The Russell 2000 index of small company stocks gave up 32.66 points, or 2 percent, to $1,582.31. Major indexes in Europe also finished lower.
The rout is the first big jolt for stocks since the turn of the year, when fear began draining out of the market and the S&P 500 started its march back to record heights.
The U.S. and China have raised tariffs on tens of billions of dollars of each other’s goods in their dispute over U.S. complaints about Chinese technology ambitions.