US close: Stocks close sharply lower as trade tensions escalate
Stocks closed sharply lower on Tuesday following the Labor Day break after the latest round of US-China trade tariffs kicked-in over the weekend.
At the close, the Dow Jones Industrial Average was down 1.08% at 26,118.02, while the S&P 500 was 0.69% lower at 2,906.27 and the Nasdaq Composite saw out the session 1.11% weaker at 7,874.16.
The Dow Jones closed 285.26 points lower on Tuesday after Washington slapped a 15% tariff on over $125bn-worth of Chinese goods on Sunday, while China imposed its own new charges on some US products, although some reports indicated that Beijing was, in fact, proceeding more slowly.
Also at the weekend, Trump said that trade officials from both sides still intended to meet later in September, despite the escalating tensions, while on Tuesday he added via Twitter that America was doing "very well" in its negotiations with China.
But other reports indicated that Washington and Beijing were "struggling" to agree on a date for a face-to-face meeting between their trade negotiators in September.
Looking forward, analysts at Bank of America-Merrill Lynch predicted that "more pain" lay ahead, with the White House set to go ahead and carry out the remaining tranches of tariffs that it had threatened, followed by a long pause until the US elections in November and a trade truce being announced nearer to the ballot.
"One problem with this prediction is that 10 months seems like a mighty long period without a major new US action," they added.
The yield on the 10-year US Treasury note fell to 1.49% in Tuesday trade.
On the data front, IHS Markit's Manufacturing PMI ticked down to 50.3 in August from 50.4 in July. While still a decline, the figure was better than its previous estimate and the market consensus for a reading of 49.9.
Chief business economist at IHS Markit Chris Williamson said: "The August PMI indicates that US manufacturers are enduring a torrid summer, with the main survey gauge down to its lowest since the depths of the financial crisis in 2009."
Still in manufacturing news, the US manufacturing sector unexpectedly slipped into contraction territory in August amid escalating trade tensions between the US and China, according to the Institute for Supply Management.
The ISM's headline manufacturing index fell to 49.1 from 51.2 in July, missing expectations for a reading of 51.0 and below the 50.0 mark that separates contraction from expansion for the first time in three years.
"With new tariffs coming into effect and the global backdrop continuing to weaken the threat of a recession is rising, which will force the Fed into further rate cuts," said analysts at ING.
Elsewhere, US construction spending grew by just 0.1% in July, buoyed by government spending on schools, sewers and water supply infrastructure.
The Commerce Department revealed on Tuesday that spending on construction projects occurred at a seasonally adjusted annual pace of $1.29trn.
So far this year, construction spending has slumped 2.1% as a result of a sharp pullback in expenditures for homebuilding.
In corporate news, shares in chipmakers like Nvidia and Skyworks fell in during the session on the back of the trade news, as did Boeing, Apple and bellwether Caterpillar.