Dow falls 325 points as trade war fears escalate

money.cnn.com ^ | 06/19/2018 | by Nathaniel Meyersohn

[Red Badger]

Stocks are off to another rocky start on Wall Street.

Trade war fears drove the Dow down 325 points at the open on Tuesday. That put it in negative territory for the year and on track for its sixth straight decline.

The Dow opened down 325 points on Tuesday, turning negative for the year and on track for its sixth straight day of losses.

President Donald Trump threatened Monday evening to impose tariffs on an additional $200 billion worth of Chinese goods if Beijing follows throw with its promise to retaliate against a previous round of US tariffs.

"Further action must be taken to encourage China to change its unfair practices, open its market to United States goods, and accept a more balanced trade relationship with the United States," Trump said in a statement.

There is no end in sight to the trade skirmish, as both sides continue to up the ante. The Chinese Commerce Ministry responded that it would "strike back hard" with "measures that match the US move in quantity and quality."

Investors had tried to brush off Trump's repeated threats against China, but retaliation has spiraled between the two countries. It has become impossible for the market to ignore the possibility of a trade war.

[pepsi_junkie]

300 points sounds scary. In 1980 it would have been a certified crash. Today it's a blip because the market is ridiculously high. It has to fall 3,000 or something like that before it becomes "crash" territory. 300 is a buy opportunity but even that isn't much of one because as I said, it's like a little bit of above average noise at these levels.

Worry if it's sustained for a while signalling a turn into a bear market.

[RoosterRedux]

I bought this morning just after the opening bell (and I never lose).

I can't believe that traders haven't figured Trump out yet. The way he deals with trade is no different that the way he dealt with North Korea.

Everyone thinks he is starting a war only to find out that that is Trump's MO for winning.

[RoosterRedux]

Not manipulation...just hysteria.

[robroys woman]

It will go right back up within a few days.

---

Or hours. :)

[Red Badger]

https://pbs.twimg.com/media/DfWocfMVMAAucZC.jpg

[henkster]

People don’t look at the whole picture. Trump does. It includes tax reform, cutting regulations, and continued domestic energy development. The “trade war” is just one facet, and Trump is managing it as part of a holistic strategy.

He is doing the things that needed doing a long time ago. There will be adjustment, but economic freedom is just like any other freedom. It’s not free.

[LRoggy]

Absolutely correct.

The entire world is adjusting to the Wall Street-first mentality that maximizing the bottom line is the ONLY approach, even if it meant selling Americans down the drain. If a multi-national was growing overseas in order to sell into that market as part of their supply chain that was fine.

But when they started to import back into the U.S. that’s when it crossed the line. It’s absurd that in order to save $2 dollars off the cost of a hammer it had to be outsourced overseas; the American public is finally starting to get the idea that the $2 saved cost Americans their livelihoods. And that’s the step that MANY countries are starting to understand, and that’s going to be the partly painful transformation.

Also understnad that the VAST majority of Americans DO NOT KNOW the steps the Chinese take when we want to export to their markets. Many of us here do because we actually pay attention, but when the Trade issue takes up even more time in the Media and the truth about A) the Technology Transfer requirements and B) the enormous influence of the Chinese People’s Liberation Army on ownership of economic assets in that country to fund their military ambitions, the backlash will be far bigger than anyone can imagine.

When you have an enormous trade surplus you have by far the most to lose. Clancy’s novel The Bear and The Dragon is based on how a trade war between the US, Europe, etc., versus China plays out and it’s VERY realistic.

And if the Chinese government and it’s people think they can scare us by boycotting U.S. goods they might want to take a look at the 1980’s and Japanese car imports and how Americans publicly started to destroy those cars. I would not want to be on the Chinese side of this if it gets out of hand. We can supply all our food, they can’t.

[HangnJudge]

[Hawthorn]

>> Not manipulation...just hysteria <<

Neither. Just a market fluctuation.

[bert]

re Fluctuation:

Can trader algorithms sense a down turn and sell and then sense the bottom and buy back?

[henkster]

We can supply all our food, they can’t.

Some nations are self-sufficient in food. Some nations can be self-sufficient in energy. Some nations have advanced industrial economies. Very few countries have all three. The United States is one of them.

China is not.

[Hawthorn]

>> When you have an enormous trade surplus you have by far the most to lose <<

A trade surplus means that you have an investment deficit. Not a good thing. It’s better to have an investment surplus.

Just remember these identities:

(1) TD = (-1)*IS

(2) TS = (-1)*ID

[Hawthorn]

>> Can trader algorithms sense a down turn and sell and then sense the bottom and buy back? <<

Sure, if we’re in “normal” times. But we’ve always gotta remember that the algorithms are far from infallible.

In particular, they can break down when genuine hysteria or panic hits the market.

(Think 9/11, for example, when markets had to be closed to avoid a total panic-based meltdown. In a situation like that, the algorithms are totally worthless.)

[Teacher317]

For the record, the S&P passed the record level I believe in the past few days.

Not correct. You meant the NASDAQ.

Like the DOW, the S&P is about flat for calendar year 2018. It set a new record on JAN 9 2018 of 2751, and is currently at 2751. (It topped out at 2872.87 on JAN 26 2018)

The DOW opened the year at 24,800, and is currently at 24,600 (peaking at 26,600 on JAN 26 2018)

The NASDAQ is the winner this calendar year, hitting 7000 for the first time ever on JAN 2 2018, and is currently at 7675. It peaked at 7761 on Thursday, JUN 14 2018, five days ago.

[VanShuyten]

I doubt this can be blamed on the China trade problems. All prices are down, including exchange rates, oil, and metals, including gold and silver. If there was real worry about a trade war and drop in production, precious metals would be going up, especially if the dollar is weakening.

This is just an adjustment to the hot, Trump-inspired economic growth of the last 18 months.

[bert]

Ok,Ok.....

I had the S&P max at 2740 rather than the 2872 you noted

[Red Badger]

The sky is falling!.......The sky is falling!....The sky is falling!.........

[RoosterRedux]

I spent much of my career about 40 feet down the hall from my firm's trading floor. This "fluctuation" looks like an emotional reaction to me (i.e. it's not based on any apparent fundamentals...just a reaction to the uncertainly created by Trump's negotiating style).

[Terry Mross]

A huge majority of Americans have no idea what the Dow Jones Industrial Average is. All they know is that when it goes up it doesn’t affect them.

[RoosterRedux]

I write trading algorithms (in VBA for Excel) and can say that looking for an effective algorithm has all the excitement that prospecting for gold must have.

That said, after doing this for years, I have yet to strike the mother lode.;-)

I have written algorithms for every trading strategy and indicator known to man...and have yet to find one which can effectively predict significant stock movements over time.

I have even written algorithms which combine two or more strategies. Lots of nerd fun, but still nothing reliable.

From what I hear, the quants at successful hedge funds use information from data mining companies. For example I recently heard of a firm that was buying satellite streams so that they could examine freight truck movement from factory parking lots.