US stocks fell on Monday after President Donald Trump pledged to raise tariffs on Chinese goods, though Wall Street finished well off its session lows as some investors saw Trump’s comments as a bargaining tactic and expressed confidence in an eventual trade agreement.
After the closing bell, however, equity index futures took a fresh hit after senior US trade officials said China had reneged on its previous commitments and the tone of negotiations had soured.
S&P e-minis were last down 0.60% after resuming trading for the overnight session, a signal that investors expect the market to open lower on Tuesday.
US Trade Representative Robert Lighthizer said the Trump administration would “probably” publish a notice on Tuesday about plans to raise tariffs on $200 billion worth of Chinese goods to 25% from 10%.
In a surprise tweet on Sunday, Trump said the higher levies would go into effect on Friday if no deal with China was sealed. His comments triggered a global sell-off in stocks and inflamed fears of a slowdown in global growth, fears which have periodically roiled markets over the past year.
The benchmark S&P 500 fell as much as 1.6% during the session while US Treasury yields dropped as investors turned to low-risk government bonds.
Yet the major indexes recovered much of their losses in afternoon trading as some investors remained hopeful that a trade agreement would soon be reached. The S&P 500 ended the day down 0.45%.
“It seems like a negotiating stance,” said David Lefkowitz, senior Americas equity strategist at UBS Global Wealth Management’s chief investment office in New York. “Our base case still is that China and the United States do find common ground.
“The probability that there is a negative outcome has probably gone up a little bit, but quantifying that, it’s hard to say,” he added.
A rise in healthcare shares helped offset the trade-driven losses. At the Sohn Investment Conference on Monday, Glenview Capital Management chief executive Larry Robbins said he favoured the sector.
The sector got a further lift as Centene shares rose 6.6% after Reuters reported that two hedge funds have built stakes in the health insurer and are exploring a challenge to its planned acquisition of WellCare Health Plans.
But materials, industrials and technology shares dropped as investors moved away from cyclical and trade-sensitive sectors.
Boeing, the single largest US exporter to China, fell 1.3%. Chipmakers, which get a sizeable portion of their revenue from China, also tumbled. The Philadelphia chip index slid 1.7%. Apple shares, which have also been sensitive to signs of weakness in China, declined 1.5%.
The Dow Jones Industrial Average fell 66.47 points, or 0.25%, to 26 438.48, the S&P 500 lost 13.17 points, or 0.45%, to 2 932.47 and the Nasdaq Composite dropped 40.71 points, or 0.5%, to 8 123.29.
In a bright spot, Anadarko Petroleum shares rose 3.8% after Occidental Petroleum increased the cash component of its $38 billion bid, removing a need for any deal to receive the approval of Occidental’s shareholders.
Occidental is trying to convince Anadarko to accept its offer and abandon the agreed-upon $33 billion sale to Chevron. Shares of Chevron rose 1.0%.
Declining issues outnumbered advancing ones on the NYSE by a 1.45-to-1 ratio; on Nasdaq, a 1.28-to-1 ratio favoured decliners.
The S&P 500 posted 19 new 52-week highs and four new lows; the Nasdaq Composite recorded 69 new highs and 33 new lows.
Volume on US exchanges was 6.45 billion shares, compared to the 6.62 billion average for the full session over the last 20 trading days.