Dow ends bruising session 2.3 per cent lower on trade war fears

Stocks dropped on Friday with the Dow falling more than 500 points, as investors grew concerned over a US trade war with China.

NEW YORK (AFP) - Wall Street stocks finished sharply lower on Friday (April 6) after escalating threats in the US-China trade spat deepened fears of an all-out trade war.

The Dow Jones Industrial Average ended down nearly 575 points, or 2.3 per cent, at 23,932.76 after sinking more than 3 per cent earlier.

The broad-based S&P 500 dropped 2.2 per cent to 2,604.47, while the tech-rich Nasdaq Composite Index tumbled 2.3 per cent to 6,915.11.

Investors were unnerved by President Donald Trump's threats of tariffs on an additional $100 billion in Chinese imports as the US president hit out at China's "unfair retaliation" to a prior Trump announcement of US$50 billion (S$65 billion) in tariffs on Chinese goods.

China's reply was also strident.

"If the US side disregards opposition from China and the international community and insists on carrying out unilateralism and trade protectionism, the Chinese side will take them on until the end at any cost," the Commerce Ministry said in a statement.

Losses were broad-based, with all 30 members of the Dow finishing negative.

"The market is getting more concerned about the possibility of a trade war between the US and China," said Tom Cahill, portfolio strategist at Ventura Wealth Management.

"The market does not like uncertainty and right now we have a lot of it."

US stocks were in the red throughout the session but losses deepened in the afternoon following an interview with Treasury Secretary Steven Mnuchin and a speech by Federal Reserve chairman Jerome Powell. analyst Patrick O'Hare said investors were disappointed by the lack of reassurances from Trump administration officials, including Mnuchin, who told CNBC that the administration hoped to negotiate but acknowledged that a trade war was a possibility.

The Mnuchin interview was a "reminder that things are moving in a contentious direction because there are no negotiations and no one is really backing down on either side on the implementation of tariffs," O'Hare said.

Fed chair Powell, meanwhile, signalled that the US central bank still plans to press ahead with additional interest rate hikes in 2018, a stance that also disappointed investors.

"The market might have been starting to contemplate that all the trade volatility might lead the Fed to be a little less aggressive with its policy, and at least for today, the Fed chairman didn't give any indication that that was going to be the case," O'Hare said.