North American stocks battered as Trump’s trade rhetoric renews market volatility

Stocks were battered again by an escalating trade dispute between the United States and China, along with a surprisingly weak U.S. employment report for March, continuing a bout of volatility that has gripped markets for more than nine weeks.

The Dow Jones industrial average fell as much as 767 points, or 3.1 per cent, on Friday before recovering some lost ground toward the end of the day − shattering hopes among investors earlier in the week that leaders from the world’s two largest economies would back away from potentially damaging tit-for-tat trade tariffs.

U.S. President Donald Trump announced late Thursday that he had instructed U.S. trade officials to consider additional tariffs on US$100-billion worth of Chinese imports after China responded earlier in the week to initial U.S. tariffs, raising concerns about another response from China.

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Doug Porter, chief economist at BMO Nesbitt Burns, pointed out that Mr. Trump is well known for using bluster to achieve relatively limited goals.

“That’s likely the model here as well,” Mr. Porter said in a note, “but the underlying concerns for investors and economists are that: a) we are in uncharted terrain, with both sides seemingly willing to look past the niceties of trifles like World Trade Organization rules; and, b) we are not dealing with two players who are exactly known for compromise and/or backing down.”

The Dow fell 572.46 points, or 2.3 per cent, ending the day at 23,932.76. The broader S&P 500 fell 58.37 points or 2.2 per cent, closing at 2,604.47.

Among the biggest casualties were companies that rely on international trade that is now being threatened by tariffs. Plane-maker Boeing Co. fell 3.1 per cent, chip-maker Intel Corp. fell 3.2 per cent and industrial equipment-maker Caterpillar Inc. fell 3.5 per cent.

But all 30 companies in the blue-chip Dow index ended the day down, along with 98 per cent of the companies in the S&P 500, reflecting wide-ranging concerns among investors.

The turbulence also spilled well beyond U.S. markets, illustrating the importance of trade and its potential impact on the global economy at a time when coming corporate profits are expected to be strong.

According to Thomson Reuters, analysts expect that companies in the S&P 500 will report an 18.4-per-cent increase in their first-quarter profits, marking the strongest year-over-year profit growth in seven years.

Canada’s S&P/TSX composite index fell 148.64 points or 1 per cent, closing at 15,207.41. Energy stocks and financials were hit the hardest. Stocks fell in Japan and Europe as well.

But bonds, a traditional haven for investors seeking shelter, rallied, sending yields down. The yield on the 10-year U.S. Treasury bond fell to 2.77 per cent from 2.83 per cent on Thursday.

Amid the concerns about tariffs, investors also had to digest an economic report that was out of line with some of the more upbeat readings in recent months that pointed to robust economic expansion.

The U.S. Labor Department reported on Friday that employers added just 103,000 jobs last month, a noticeable setback from February when 326,000 jobs were created, while the jobless rate held steady at 4.1 per cent.

Economists weren’t alarmed by the report, noting that the three-month average reflects a strong-growing U.S. economy that should keep the Federal Reserve on track for additional interest rate hikes this year.

“The March outcome was below expectations but let’s keep things in perspective as it followed an unsustainable jump of 326,000 the month before,” Stéfane Marion, chief economist and strategist at National Bank Financial, said in a note.

But the report certainly wasn’t good enough to shift investors’ attention away from the brewing trade war between the U.S. and China – especially when Mr. Trump can make U.S. trade policy announcements on Twitter over the weekend, when stock markets are closed.

“A certain White House personality can play havoc with your portfolio, as we’ve seen,” Avery Shenfeld, chief economist at CIBC World Markets, said in a note.