United States stocks were under pressure on Friday, hit by fears that President Donald Trump‘s shock threat of tariffs on Mexico could prove the trigger that pushes the world’s largest economy into recession.
Friday, Mexican President Andres Manuel Lopez Obrador said he would respond with “great prudence” to Trump’s threats – and that Foreign Minister Marcelo Ebrard would be in Washington tasked with convincing the US government that Trump’s measures were in neither country’s interest.
Trump’s latest threat spread more gloom in the markets, which have already been roiled by an escalating trade war between the US and China.
Wall Street is on course for a fall of more than 6.5 percent in May, its worst performance this year and the trigger for a flood of money into the bond market that has encouraged expectations of a U.S. recession.
US Treasury yields fell to new multi-month lows, while the yield curve, as measured in the gap between three-month and 10-year bond yields, remained heavily inverted.
An inversion in the yield curve is seen by some as an indicator that a recession is likely in one to two years.
Carmakers and manufacturers also bore the brunt of Trump’s Mexico threat. General Motors Co dropped 3.9 percent and Ford Motor Co 3.2 percent, pushing the consumer discretionary sector 1.46 percent lower.
At 9:46 a.m. ET the Dow Jones Industrial Average was down 291.27 points, or 1.16 percent, at 24,878.61, the S&P 500 was down 33.95 points, or 1.22 percent, at 2,754.91 and the Nasdaq Composite was down 100.31 points, or 1.33 percent, at 7,467.41.
Adding to risks was Beijing’s warning on Friday that it would unveil an unprecedented hit-list of “unreliable” foreign firms, as a slate of retaliatory tariffs on imported U.S. goods was set to kick in at midnight.
Tariff-sensitive industrials declined 1.37 percent, while FAANG stocks – Facebook Inc, Apple Inc, Alphabet Inc, Netflix Inc and Amazon.com Inc – fell between 0.8 percent and 2.6 percent.
Also adding to the market’s woes was China’s disappointing manufacturing data for the month of May.