Dow set to drop nearly 500 points as China hits back at U.S. with new tariffs

U.S. stock-index futures pointed to a sharply lower open on Wednesday, the latest example of heavy day-to-day volatility being driven by concerns over the prospect of a trade war between China and the U.S.

Chinese officials said they plan to impose tariffs of up to 25% on 106 American products, including soybeans and airplanes. That comes after the Trump administration on Tuesday gave details on the $50 billion of Chinese goods that it plans to hit with 25% tariffs unless Beijing makes major trade and investment concessions soon.

The retaliation was the latest sign that trade conflicts between the U.S. and major trading partners are escalating, something analysts have cited as a primary risk for equities this year.

See: 5 charts that show how Chinas response to U.S. tariffs is rattling markets

And read: U.S. soybeans would be Chinas biggest weapon in a trade war

What are the main benchmarks doing?

Dow Jones Industrial Average futures
YMM8, -2.15%
fell by 465 points, or 1.9%, to 23,519, while S&P 500 futures
ESM8, -1.56%
shed 38.70 points, or 1.5%, to 2,574.50. Nasdaq-100 futures
NQM8, -1.90%
gave up 121 points, or 1.9%, to 6,348.25. The Nasdaq was at risk of falling below its 200-day moving average for the first time in nearly two years; that closely watched technical level is seen as a gauge of long-term momentum, and breaking decisively below it could trigger additional losses.

On Tuesday, the Dow
DJIA, -1.59%
S&P 500
SPX, -1.16%
and Nasdaq Composite
COMP, -1.14%
all rose by more than 1%, rebounding partially from a sharp selloff on Monday. Volatility has been extremely heightened in 2018; so far this year, the S&P 500 has had three times as many sessions with a 1% move than in all of 2017.

Whats driving markets?

Worries are persisting about a potential global trade war, helped by Chinas response to the U.S. governments move. Signaling a tit-for-tat approach, Chinas Ministry of Commerce said the tariffs would affect $50 billion of U.S. goods.

Check out: How a trade skirmish could become a global trade war

What are strategists saying?

While corporate fundamentals remain strong, markets are forward looking and the broadening scope of US-China trade tensions is seen as a growing threat to global growth and corporate earnings, forcing equity valuations lower, said Alec Young, managing director of global markets research at FTSE Russell.

Which stocks are in focus?

Manufacturers with significant exposure to China were showing big losses in premarket action, with aerospace giant Boeing Co.s stock
BA, -2.96%
down 4.8%, while heavy-machinery maker Caterpillar Inc.
CAT, -2.96%
fell 3.1%. Ford Motor Co.
F, -1.08%
and General Motors Co.
GM, -0.47%
were shedding 2.5% and 3.6%, respectively.

Chinas Commerce Ministry published a list of major American exports that were being targeted, and it included airplanes, cars and chemicals, along with soybeans
SK8, -3.88%
sorghum and beef.

Technology stocks are staying in focus, after driving recent losses. Facebook Inc.
FB, -1.72%
which recently tumbled into bear-market territorya 20% drop from a peakamid a scandal over how it has managed user data, could remain volatile after lawmakers said that Chief Executive Officer Mark Zuckerberg would testify before the House Energy and Commerce Committee on April 11 about the companys use and protection of user data.

Shares of e-commerce giant Inc.
AMZN, -1.55%
fell 2.4% in premarket trading. The company, which often moves on tech issues but is classified as a consumer-discretionary name, has been under pressure from President Donald Trumps attacks on it, though analysts said it was unlikely Trumps attacks would result in a meaningfully different regulatory environment.

Tesla Inc. shares
TSLA, -2.89%
dropped 4.3% premarket. Late Tuesday, the maker of electric cars reported first-quarter production and delivery numbers that missed expectations, but said it would not need to raise more money this year. Analysts noted the company also said this in early 2016, shortly before it did raise several billion dollars.

Music-streaming service Spotify Technology SA
SPOT, -4.93%
looks set to stay in the spotlight in its second day of trading on the New York Stock Exchange. The stock opened with a bang Tuesday, but closed on a down note. Shares fell 1.4% in premarket action on Wednesday.

CBS Corp.
CBS, -1.36%
slid 1.5% premarket after the media giant reportedly made an offer to acquire Paramount Pictures parent Viacom Inc.
VIAB, -0.24%
that was below Viacoms current market value of $12.5 billion. Both CBS and Viacom are controlled by media mogul Sumner Redstones holding company. Viacom shares werent yet active premarket.

Shares in home builder Lennar Corp.
LEN, +2.54%
rose 1.4% premarket following better-than-expected earnings, while used-car seller CarMax Inc.
KMX, -2.00%
fell 5.2% ahead of the open after its results.

Proteostasis Therapeutics Inc.
PTI, +4.83%
climbed 13.5% in premarket trading after the Food and Drug Administration gave a fast track designation to its cystic fibrosis treatment.

Which economic reports are on tap?

ADPs report on private-sector employment showed 241,000 jobs added in March, far more than had been expected. The news is a positive read on the labor market ahead of Fridays closely watched government data on nonfarm payrolls.

Markit is scheduled to publish a March report on services at 9:45 a.m. Eastern. Then, ISM is due to release an update to its nonmanufacturing index at 10 a.m. Eastern, with economists polled by MarketWatch forecasting a March reading of 59.0%.

Also at 10 a.m. Eastern, February factory orders data are on tap, with 1.7% growth expected.

Check out: MarketWatchs Economic Calendar

On the Federal Reserve front, minutes from the central banks March 20-21 meeting are due for release at 2 p.m. Eastern.

St. Louis Fed President James Bullard is slated to give a speech on monetary policy to the Arkansas Bankers Association in Little Rock at 9:45 a.m. Eastern, and Cleveland Fed President Loretta Mester is schedule to talk about diversity in economics at 11 a.m. Eastern at Central State University in Wilberforce, Ohio.

What are other markets doing?

European stocks
SXXP, -1.04%
fell sharply, after Asian markets finished mixed.

Gold futures
GCM8, +0.81%
climbed, while oil futures
CLK8, -1.97%
and the ICE U.S. Dollar Index
DXY, -0.10%
lost ground.

Related Topics U.S. Stocks Markets NY Stock Exchange NASDAQ

Quote References YMM8 -515.00 -2.15% ESM8 -40.75 -1.56% NQM8 -122.75 -1.90% DJIA -382.61 -1.59% SPX -30.27 -1.16% COMP -79.37 -1.14% BA -9.80 -2.96% CAT -4.29 -2.96% F -0.12 -1.08% GM -0.17 -0.47% SK8 -40.25 -3.88% FB -2.69 -1.72% AMZN -21.52 -1.55% TSLA -7.72 -2.89% SPOT -7.34 -4.93% CBS -0.72 -1.36% VIAB -0.07 -0.24% LEN +1.45 +2.54% KMX -1.20 -2.00% PTI +0.22 +4.83% SXXP -3.84 -1.04% GCM8 +10.80 +0.81% CLK8 -1.25 -1.97% DXY -0.09 -0.10% Show all references
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