It was a volatile day for U.S. markets that plunged on the open on news that the United States had banned 28 Chinese companies from doing business with American companies due to human rights issues.
Markets jumped briefly on news that the Federal Reserve is planning to increase its balance sheet again, in part based on the shock to overnight lending markets in September, Chairman Jerome Powell said Tuesday.
However, trade negotiation woes and digestion of Federal Reserve news led the markets to reverse all gains and head south rapidly.
The S&P 500 and Nasdaq both closed off more than 1.5% while the Dow Jones Industrial Average closed off nearly 1.25%, with all markets closing near their lows.
The Trump administration put visa restrictions on Chinese officials Tuesday amid ongoing abuses of Muslim minorities in the Xinjiang region.
“The United States calls on the People’s Republic of China to immediately end its campaign of repression in Xinjiang, release all those arbitrarily detained, and cease efforts to coerce members of Chinese Muslim minority groups residing abroad to return to China to face an uncertain fate,” the top U.S. diplomat said in a statement.
Investors hoping for a resolution to the trade tensions between the U.S. and China during the high-stakes trade talks that were set to resume on Thursday in Washington are now filled with trepidation that the trade war will linger on.
China, of course, believes the U.S. should mind its own business.
“We strongly urge the U.S. to immediately stop making irresponsible remarks on the issue of Xinjiang, stop interfering with the wrong actions of China’s internal affairs, and remove relevant Chinese entities from the list of entities as soon as possible,” a Chinese commerce ministry spokesperson said in a statement Tuesday.
“China will also take all necessary measures to resolutely safeguard China’s own interests,” the spokesperson said.
Financial experts also note that this selloff is simply the continuation of a move away from stocks that has been setting up for some time.
“We’ve been setting up an unattractive risk-return environment for the market, and we’re seeing that play out today,” said Mike Bailey, director of research at FBB Capital Partners. He noted the market went from being relatively quiescent for a few weeks, at which time volatility coiled, and now it is receiving “bad news.”
Investors who believe the market is ready for a continued pullback or selloff can look into the Direxion Daily S&P 500 Bear 1X ETF (NYSEArca: SPDN).
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