• President Donald Trump threatened more levies against China on Thursday, stating that he has asked the United States Trade Representative to consider $100 billion in additional tariffs against China.
  • Boeing and Caterpillar, two companies that could be adversely affected by a trade war with China, both fell more than 3.5 percent.

Stocks fell sharply on Friday as worries of a trade war brewing between the U.S. and China grew. Wall Street also digested disappointing employment data.

The Dow Jones industrial average fell 593 points, with Boeing and Caterpillar as the biggest decliners in the index. The S&P 500 declined more than 2 percent, with industrials as the worst-performing sector. The Nasdaq composite dropped 2.2 percent.

The sell-off accelerated in the final two hours of trading after Fed Chief Jerome Powell indicated the central bank would continue hiking rates this year. Some traders were hoping the Fed Chief would acknowledge the recent market volatility caused by the trade dispute.

“This is truly a reaction to China,” said JJ Kinahan, chief market strategist at TD Ameritrade. “What we’ve seen with this administration is a trend of a big statement, followed by everyone getting riled up, and then a pragmatic solution is found.”

“Cooler heads may prevail moving forward,” Kinahan said.

Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., February 5, 2018.

Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., February 5, 2018.

After China announced fresh tariffs on 106 U.S. products Wednesday, President Donald Trump threatened more levies Thursday evening, stating that he has asked the United States Trade Representative to consider $100 billion in additional tariffs against China.

U.S. stock futures plunged overnight on the news, while global stock markets fell. China’s Commerce Ministry said Friday the country will not hesitate to react with a “major response to the new tariffs from the U.S.

Trump later tweeted on Friday: “China, which is a great economic power, is considered a Developing Nation within the World Trade Organization. They therefore get tremendous perks and advantages, especially over the U.S. Does anybody think this is fair. We were badly represented. The WTO is unfair to U.S.”

Boeing and Caterpillar, two companies that could be adversely affected by a trade war with China, both fell more than 3.5 percent.

Shares of large-cap tech companies also fell. Apple and Amazon both declined more than 2 percent, while Netflix dropped 2.2 percent after briefly trading higher.

Stocks briefly came off their lows in midday trading after an official from Mexico’s economic ministry said the person was “very convinced” a new deal on NAFTA will be reached soon.

But the major indexes resumed their decline after Treasury Secretary Steven Mnuchin said there was a possibility of a trade war with China.

“If this leads to more tariffs that’s going to be hurtful to the economy,” said Scott Clemons, chief investment strategist at Brown Brothers Harriman.

The move lower in stocks also follows the release of much weaker-than-expected jobs data. The Labor Department reported the U.S. economy added 103,000 jobs in March. Economists polled by Reuters expected a gain of 193,000.

“I’d call this one a mixed bag. The headline number may disappoint but there’s more than meets the eye,” said Mike Loewengart, vice president of investment strategy at E-Trade, noting that wages improved and unemployment remains at historically low levels.

“For investors, today’s report may be a tough one to swallow when coupled with a trade standoff that seems to be intensifying with each passing day,” Loewengart said.