Looking across the stock market, it's hard to find a company that isn't vulnerable in some degree to the U.S.-China trade war.
Looking across the stock market, it's hard to find a company that isn't vulnerable in some degree to the U.S.-China trade war.
That's why all but 2% of the stocks in the S&P 500 fell on Aug. 5, when worries ratcheted higher after China let its currency devalue to its lowest level in a decade. One concern is that all the uncertainty on trade will lead businesses and shoppers to hold off on spending in hopes of waiting out the tumult. Businesses say they have seen inklings of such behavior, which, if it accelerates, could lead to a self-fulfilling cycle where weaker sales for companies push them to cut back on hiring. That could lead in turn to even weaker spending and do more damage to the economy. That's trouble for most companies, to some degree.
That's in large part because the price of oil has sunk on worries that the trade war will do lasting damage to the global economy. If that happens, countries around the world will have less need to burn oil. The price of benchmark U.S. crude plunged nearly 8% on Aug. 1, its worst day in 4½ years.Financial stocks have been the second-worst performing sector in the S&P 500 in recent weeks as the prospect of less-profitable lending threatens banks' profits.
The market for interest rates has gone so haywire this month because of worries about a possible recession that long-term Treasury yields in some cases are lower than short-term yields. That's trouble for an industry that relies on borrowing money at short-term rates, lending it out at long-term rates and pocketing the difference.
Since Trump's 2018 tweet that"trade wars are good, and easy to win," Micron is down 8.5%, while the S&P 500 is up 7.9%.Since Trump initiated the trade with China in 2018, the reaction in the market has been to sell big industrial companies whenever tensions rise. The temptation makes sense given how global the companies are, but it may be misguided, said Stephen Volkmann, an equity analyst at Jefferies who covers machinery and industrial companies.
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