- US Stocks were hit hard in Monday trade after Wall Street wiped out its 2018 gains last week.
- The Trump administration is preparing tariffs on all Chinese imports to the US if trade talks fail, Bloomberg reported.
- The tech-heavy Nasdaq had earlier led the major averages higher after IBM agreed to pay $34 billion for the cloud-software company Red Hat.
US stocks rallied but then reversed hard on Monday as escalating trade tensions upended an earlier technology-fueled rally, adding to fears about rising rates and signs of slowing growth that have battered global markets this month.
Bloomberg reported President Donald Trump is preparing to place tariffs on all remaining Chinese import if proposed talks with Beijing next month fail. That came hours after the World Trade Organization was scheduled to hear a complaint Washington filed against Beijing, accusing Chinese companies of violating international intellectual property rules.
The Nasdaq Composite eliminated earlier gains and fell 1.63%, with Netflix (-5%) and Amazon (-6.3%) among the biggest losers, after the UK rolled out plans for a digital services tax expected to target large technology companies. Treasury Chief Philip Hammond told lawmakers the new policy would bring in £400 million, or $512 million, each year.
The Dow Jones Industrial Average also turned negative in afternoon trading and closed down 1%, or more than 600 points from session highs. The S&P 500 was 0.66% lower. After a series of sharp sell-offs in recent weeks, the US indices are on track for their worst month since the financial crisis.
Technology stocks had jumped at the US open after IBM announced on Sunday that it would buy Red Hat in a nearly $34 billion deal, its largest acquisition yet. The deal, which pays Red Hat stockholders $190 a share, comes at a more than 60% premium to where shares settled on Friday.
Earnings season continued, with HSBC posting a 28% jump in pre-tax profits for the third quarter. After choppy results from high-flying technology companies like Amazon and Google parent company Alphabet last week, investors will be closely watching Facebook and General Electric earnings Tuesday.
“Given the recent sell-off in equities on growth concerns and the importance of tech in the bull market rally, the short-term negative spillover is understandable,” said Jon Gordon of UBS Global Wealth Management.
“But while recent weakness in semiconductors in part reflects a cyclical downturn in demand, we don’t expect tech weakness to undermine the broader market on a sustainable basis.”
In Europe, German Chancellor Angela Merkel announced she would not seek re-election as leader of the Christian Democratic Union in 2021. The Stoxx Europe 600 was up 1.7% in afternoon trading, with carmakers leading the way higher after Bloomberg reported Beijing is considering cutting its tax on vehicles in half.
Italy dodged a credit downgrade by S&P, easing fears about public spending plans that have brought its populist government head to head with Brussels. Last week, Moody’s cut Rome’s credit rating to one level above junk.
Yields on US government bonds edged higher as a recent wave of safe-haven demand eased. Consumer spending rose for a seventh straight month in September, the Commerce Department said Monday, but personal income recorded the smallest gain in more than a year. Monthly employment numbers are out in the US on Friday.
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