Dow Falls 391 Points Amid US-China Trade Woes, Hong Kong Protests

Wall Street set to open lower as trade war stokes fears of recession

Sysco rose 3.1% after the food distributor beat Wall Street's fiscal fourth quarter profit forecasts.

Banks and technology companies drove down a broad mix of stocks on Monday, at one point pushing the Dow Jones Industrial Average more than 400 points lower.

The latest wave of anxious selling left the S&P 500 index down 35.95 points, or 1.2%, at 2,882.70. Treasury bond yields once again fell sharply as investors piled into safe assets. With the USA and China offering no respite to their trade war and a slew of data pointing to slowing global growth, traders will look to this week's euro-zone GDP figures and industrial production reports from both China and America for further clues to the outlook. The risk is that the tit-for-tat tariff battle between the world's two largest economies could turn the economic slowdown into a recession.

Over the weekend, Goldman Sachs Group Inc said fears of the U.S.

Real estate and utilities stocks posted the smallest declines. The new tariff would go into effect September 1 and more directly affect USA consumers.

Trade tensions spiked earlier this month after President Donald Trump vowed to impose a 10% tariff on $300 billion of USA imports from China.

Investors were rattled by a Chinese government statement Monday saying the mostly nonviolent Hong Kong protests "show the sprouts of terrorism" and were an "existential threat" to the population.

Hong Kong's airport was forced to cancel more than 100 flights on Monday after thousands of demonstrators clogged departure and arrival halls preventing passengers from boarding any planes.

Beijing condemned the protests as "terrorism" and state media published a video showing Chinese military vehicles on Hong Kong's border. Markets in Taiwan, New Zealand and Southeast Asia also retreated. The peso plunged more than 15% against the USA dollar on worries that populists will replace Argentina's business-friendly government.

"The stock market's selling off because the bond market is rallying like insane", said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago.

CNBC reported that the benchmark 10-year US Treasury yield, which hit its lowest last week since 2016, dipped to a low 1.63%.

Henkel shares slid 5 percent after the German consumer goods company lowered its full-year outlook for sales and earnings, but German meal-kit delivery firm HelloFresh jumped 7 percent on breaking-even for the first time since its trading debut. Debt prices move in the opposite direction of yields. Bank of America fell 2.5% and Citigroup gave up 2.9%.

Last week, Trump said he'd be "fine" if the USA and China don't go ahead with a meeting next month, dampening investors' hopes for a resolution. The S&P 500 is up almost 15%, though it's down 4.7% from its all-time high set at the end of July.

"The Fed has reversed its position over the past 9 months because the outlook for the economy, both here and overseas, deteriorated significantly", he wrote.

"The bear is alive and kicking", Morgan Stanley equity strategists led by Michael Wilson wrote in a note to clients on Monday.

Rather than the trade war, Wilson argued investors are reacting negatively to the realization that the Fed has gone from very hawkish to very dovish due to the darkening economic environment.

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