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The Escalating Trade War Continues to Spook Markets

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May. 30 2019, Published 10:26 a.m. ET

The NASDAQ is now down 7% from its recent highs

The NASDAQ Composite Index fell 0.4% on May 28—its fifth decline in seven sessions—as trade tensions between the United States and China took a turn for the worse. The index is now down nearly 7% from the high of 8,176 it reached one month ago in intraday trading.

The US-China trade war continued to spook investors after President Donald Trump suggested that a near-term deal between the two countries was unlikely. Tariffs on Chinese goods are likely to increase considerably.

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Stocks with high exposure in China have tumbled

Tech stocks Apple, Intel, and NVIDIA, which have significant exposure in China, have seen falls of 11.2%, 14.7%, and 21.0%, respectively, in May. However, Internet players Facebook, Snapchat, and Google, which have minimal to no exposure to China, ticked up on May 29. In fact, Facebook has been the best-performing FAANG stock in May.

Meanwhile, the US economy, which has been relatively steady amid fears of a global slowdown, has shown some signs of deterioration. Data on new home sales, durable goods, manufacturing, and retail have all pointed to a slowdown in the world’s biggest economy.

The tech-rich NASDAQ Composite Index is still up 14.7% year-to-date, though—thanks more to the Fed’s loose monetary policy than strong earnings growth.

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