Dow decline exceeds 300 points, while Nasdaq Composite skids 150 points

Stocks ended at their lowest levels in a month on Friday as investors worried that President Trump’s escalation of the trade war with China would impact economic growth, despite news that the U.S. labor market remained healthy.

The benchmark S&P 500 index fell for a fifth straight day, to record the steepest weekly loss since last December’s selloff, closing at its lowest level since June 26.

Stocks extended losses after China vowed to retaliate against President Trump’s decision on Thursday to impose 10% tariffs on the remaining $300 million of imports from China not already subject to levies. Second quarter corporate earnings for S&P 500 companies are now also on track to record a decline for two consecutive quarters for the first time since 2016.

How did major benchmarks perform?

The Dow Jones Industrial Average  fell 98.41 points, or 0.4%, to close at 26,485, while the S&P 500 declined 21.51 points, or 0.7%, to finish at 2,932.05. The Nasdaq Composite Index   ended 107.05 points at 8,004.07, a fall of 1.3%.

The Dow lost 2.6% for the week, the biggest weekly loss since May 31 and is off 3.20% from its record close 27,359 on July 15, but remains up 14% for the year-to-date.

The S&P 500 index fell 3.1% this week, its biggest loss since the week ended Dec. 21 and is now off 3.1% from a record close at 3025.85 set on July 26, but is still up 17% for the year.

The Nasdaq Composite lost 3.2% for the week, also its biggest weekly loss since Dec. 21, and is now off 3.9% from its record close of 8,330.21 on July 26.

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What drove the market?

Stocks reliant on business with China led the market down Friday. Apple , Caterpillar , Nike and Cisco  dragged down the Dow Jones Industrial Average.

China’s spokesperson at the foreign ministry, Hua Chunying, said at a daily press briefing that Beijing would have to take countermeasures if the U.S. was committed to putting more tariffs on Chinese goods,

In a series of tweets on Thursday, Trump announced that the U.S. would impose 10% tariffs on the remaining $300 billion of imported Chinese goods and products not currently facing levies, catching investors by surprise after both sides earlier this week described trade talks as constructive.

The additional import tariffs are seen worsening a trend of declining business investment that could spread from the manufacturing sector to companies supplying consumer goods as well.

“Unlike in previous tariff rounds, the goods that will be affected by the 10% tariff mainly include finished goods, meaning that the impact on U.S. consumers will be more direct than it has been thus far,” Cailin Birch, global economist at The Economist Intelligence Unit, wrote in emailed comments.

Investors largely brushed off news that the . The unemployment rate held steady at 3.7%, and average hourly earnings rose 3.2% year-over-year.

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Unemployment is a lagging indicator and economists tend to pay more attention to business confidence and investment as leading indicators for economic growth.

“The labor market tends to follow trends in the broader economy with a one quarter lag, and today’s report confirms that the underlying trend is down, despite superficially solid real GDP growth in 1H2019,” said Tiffany Wilding, U.S. economist at Pimco.

On balance, the latest jobs data aren’t likely to restrain the Federal Reserve from cutting interest rate cuts again later this year if necessary following the first cut in a decade on Wednesday.

“The FOMC’s concern pertains to the external environment, particularly related to ‘trade-policy’,” and with Trump announcing new tariffs downside risks to the outlook on the economy have increased,” said analysts at ICICI Bank.

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Investors are also digesting second quarter corporate earnings. So far 77% of companies in the S&P 500 index have reported actual results, and combining actual results with estimates for companies yet to report indicates an earnings decline overall for the second quarter of 1.0%, according to FactSet data.

If earnings for the quarter do fall 1.0%, it will be the first time the S&P 500 index has reported two straight quarters of year-over-year declines in earnings since the first quarter of 2016.

Which stocks were in focus?

Apple Inc.  , after the Trump’s announcement of more tariffs on Chinese imports. Wedbush analyst Dan Ives estimated the trade dispute could lower fiscal 2020 earnings by 4% if Apple absorbs the price increases, or cut iPhone demand by 6 million to 8 million united if Apple passes on the costs to consumers.

Shares of Dow component Exxon Mobil Corp. fell 1% Friday, after the energy giant that fell less than Wall Street had expected. Revenue also fell 6% year-over-year.

Fellow Dow constituent Chevron Corp.   that beat Wall Street expectations, while revenue growth came in below. The stock ended steady.

Burger King parent Restaurant Brands International Inc.  on Friday that topped expectations and its stock rose 6%.

How are other markets trading?

U.S. 10-year Treasury yield ended the week at 1.89%, the lowest since 2016.

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Gold’s safe-haven appeal lifted prices for the precious metal Friday to their highest finish in more than six years in the wake of Trump’s intensified trade fight with China. Gold for December delivery  on Comex rose $25.10, or 1.8%, to settle at $1,457.50 an ounce — the highest most-active contract finish since May 9, 2013, according to FactSet data.

U.S. oil futures climbed over 3% on Friday, but still finished down for the week following a steep price decline on Thursday in the wake of Trump’s tariff announcement..

Overnight Thursday, Asian and European stocks had followed U.S. equities lower. Japan’s Nikkei 225 Index and Hong Kong’s Hang Seng Index . The pan-European Stoxx 600  

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