(Reuters) – Wall Street was set to open lower after tech and industrial stocks fell, as fears of a trade spat between the United States and China failed to let up after President Donald Trump proposed 25 percent tariffs on $200 billion worth of Chinese imports.
Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., July 31, 2018. REUTERS/Lucas Jackson
U.S. Trade Representative Robert Lighthizer said Trump directed the increase from a previously proposed 10 percent duty because China has refused to meet Washington’s demands and has imposed retaliatory tariffs on U.S. goods.
Beijing responded to the new threat saying it was ready to escalate the trade war.
As has been the case through the trade spat, shares of trade-sensitive companies were the first to be hit. All 28 of the 30 companies on the Dow Jones Industrial Average that were trading premarket were lower.
Caterpillar (CAT.N) and Boeing both dropped about 1 percent premarket. Chipmakers, whose major clients include Chinese companies, also declined, with Micron (MU.O), Nvidia (NVDA.O), AMD (AMD.O) and Intel (INTC.O) down between 0.7 percent and 1.2 percent.
The so-called FAANG group of stocks — Facebook (FB.O), Apple (AAPL.O), Amazon.com (AMZN.O), Netflix (NFLX.O) and Google-parent Alphabet (GOOGL.O) — dropped between 0.4 percent and 0.8 percent.
“Markets are substantially weaker as investors are spooked out by the latest development in the trade battle,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.
“Economic strength is evident and the jobs market is strong, but the trade war is creating turbulence for investors and trading is expected to be choppy, volatile and could easily change direction.”
The Federal Reserve kept interest rates unchanged on Wednesday, but characterized the economy as strong, keeping the central bank on track to increase borrowing costs in September.
At 8:34 a.m. ET, Dow e-minis 1YMc1 were down 161 points, or 0.64 percent. S&P 500 e-minis ESc1 were down 14.75 points, or 0.52 percent and Nasdaq 100 e-minis NQc1 were down 52.25 points, or 0.72 percent.
In a bright spot, Tesla (TSLA.O) jumped 9.7 percent after the electric car maker said it would produce its new Model 3 sedan at a profit, buoying hopes it will stanch its financial losses in the second half of the year.
Yum Brands (YUM.N) declined 2.5 percent after quarterly sales at established outlets missed estimates, as fewer customers dined at its Pizza Hut and Taco Bell chains.
DowDuPont (DWDP.N) dipped 1.2 percent after the chemical producer reported quarterly results.
Shares of TripAdvisor (TRIP.O) and Cognizant (CTSH.O) slipped 12.7 percent and 5.9 percent after earnings failed to impress investors.
A Commerce Department report at 10 a.m. ET is likely to show that factory goods orders rose 0.7 percent in June, compared with a 0.4 percent increase in the previous month.
Reporting by Amy Caren Daniel in Bengaluru; Editing by Shounak Dasgupta