Dow drops 315 points on trade war fears, uncertainty about Fed's next move

The Dow, S&P 500, and Nasdaq are all on pace to post their worst weekly losses of the year.
Image: Traders work on the floor at the NYSE in New York
Traders work on the floor at the New York Stock Exchange (NYSE) in New York on Aug. 2, 2019.Brendan McDermid / Reuters

Breaking News Emails

Get breaking news alerts and special reports. The news and stories that matter, delivered weekday mornings.
SUBSCRIBE
/ Source: CNBC.com
By Fred Imbert, CNBC

Stocks fell on Friday as President Donald Trump stoked U.S.-China trade fears with the announcement of more tariffs while investors digested U.S. employment data.

The Dow Jones Industrial Average traded 300 points lower, in mid-morning trading on Friday. The S&P 500 lost 1.2 percent, while the Nasdaq Composite slid 1.7 percent. The major indexes also broke below their 50-day moving averages, a key technical level watched by investors.

The indexes were on pace to post their worst weekly losses of the year. They were all down more than 3 percent for the week.

Trump’s tariff salvo breaks a truce in the long-running trade war between the world’s two largest economies, with investors fearful it could further disrupt global supply chains. His threat to slap a 10 percent tariff on $300 billion in Chinese imports came as a surprise to financial markets in the previous session, in large part because negotiators for the two sides had just met earlier this week in China.

The U.S. economy added 164,000 jobs in July, pushing the size of the labor force to a record high. But that strong wage number could be seen by traders as a sign of rising inflation, which could keep the Federal Reserve from cutting rates multiple times later this year.

“Equities are being squeezed by a double whammy,” said Alec Young, managing director of global market research at FTSE Russell. “On the one hand, Wednesday’s Fed outlook was less dovish than hoped, while President Trump’s latest consumer-focused China tariffs significantly dented the already soft global growth outlook.”

Trump is also scheduled to make a trade announcement on the European Union later on Friday.