Wall Street’s main indexes fell more than one percent on Thursday, as technology stocks were hammered by fears that the U.S.-China trade spat could turn into a tech cold war between the two countries.
Beijing said Washington needs to correct its “wrong actions” for trade talks to continue after the United States blacklisted Huawei Technology Co Ltd last week.
Although the Trump administration temporarily eased curbs on the Chinese telecoms gear maker, tensions again mounted on Wednesday following reports that the United States was considering sanctions on Chinese video surveillance firm Hikvision.
Investors now fret that tit-for-tat tariffs and other retaliatory actions by the world’s two largest economies will crimp global growth, and especially hit the high-growth tech sector.
Apple Inc fell 2.1 percent, while Microsoft Corp dropped 1.6 percent, weighing on the S&P 500 technology sector, which dropped 1.91 percent.
Chipmakers, which have a higher revenue exposure to China, also declined, with the Philadelphia Semiconductor index tumbling about three percent.
Trade-sensitive industrials slipped nearly two percent, hurt by losses in shares of bellwethers Boeing Co and Caterpillar Inc.
“It has moved into a broader trade war. Initially, it was about tariffs and retaliation, now you’re talking about banning companies and it’s not looking good in the near-term,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
“If you look at the U.S. economy a lot of the growth in earnings comes from what’s happening overseas. Now we see that’s not been helpful and as the domestic economy slows more than expected, that also could have a negative impact.”
Data from the eurozone added to the downbeat tone. A private survey showed business growth accelerating at a slower-than-expected pace this month, weighed down by a deepening contraction in the bloc’s manufacturing industry.
A report from ISH Markit showed U.S. manufacturing growth measured its weakest pace of activity in nearly a decade in May and new orders fell for the first time since August 2009 as the U.S.-China trade war intensified.
