China Announces Tariff Retaliation to Take Effect on June 1

Dow plunges 700 points amid escalating trade war between US, China

The president then continued his war of words with China on Tuesday, with a series of tweets claiming tariffs had rebuilt America's steel industry and criticising Beijing for walking away from a deal. Chipmakers were among the biggest decliners.

Safe-play holdings were the only winners as traders sought to reduce their exposure to risk. Officials also said they were preparing to expand tariffs to cover another $300 billion of goods. "Trump's objective is to get a good deal from China, and as such the new tariffs announced last week may simply be a pressure tactic forcing Beijing to accept American demands".

The 10-year U.S. Treasury yield ticked down to 2.428% from 2.455% on Friday.

"The market's realising that this was an absolute breakdown of (trade) talks and everything is gone backwards", said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. Chinese authorities were reacting to President Donald Trump's surprise decision last week to impose punitive duties on $200 billion of imports from China.

Ten of the 11 major S&P sectors were lower, with technology, industrial and material stocks posting losses of more than 3 per cent. The set to release a plan to levy a 25 pr cent additional tariff on all remaining imports from China on Monday.

Though only a small margin, that's a marked change from the past year during which the index has lagged the USA market by 9%, as investors have anxious about Italy's bulging budget deficit, slowing economic and corporate growth and Britain's chaotic exit from the European Union.

The S&P 500 posted 12 new 52-week highs and 22 new lows; the Nasdaq Composite recorded 30 new highs and 151 new lows.

Automotive Holdings was down 1.68 per cent to $2.34 after downgrading its profit guidance.

Markets may continue to experience volatility following Monday's rout, when investors lost $1 trillion in stock market value because of trade fears, according to Raymond James' Ed Mills.

The escalating trade war threatens to spoil an expected earnings recovery in the second half, however.

Elsewhere in the market, generic drug developers are sinking after many of them were accused of artificially inflating and manipulating prices.

Generic drug companies Mylan and Teva Pharmaceuticals sank 9.4 per cent and 14.8 per cent respectively after they were listed among defendants in a lawsuit by 44 states asserting a conspiracy to fix prices.

Dow Jones stock price: How is the Dow Jones doing today? It closed at $37.10. Newmont Goldcorp rose 2.5%.

The energy, technology and industrial sectors were all down more than one per cent. China also owns over $1 trillion in US national debt, or about 5% of the total, and could potentially discontinue buying debt which could put some upward pressure on treasury yields. Brent crude, the global standard, closed 0.6% lower at $70.23 per barrel. Tech stocks in the S&P 500 jumped 1.6%, with semiconductor companies making particularly big gains. Upstart U.K. lender Metro Bank, which has been rocked by accounting mistakes in recent months, dropped 1.4%.

The dollar rose to 109.64 Japanese yen from 109.34 yen late Monday.

Natural gas rose 4 cents to $2.66 per 1,000 cubic feet, heating oil rose 2 cents to $2.06 per gallon and wholesale gasoline rose a penny to $1.98 per gallon.

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