Stocks fell on Wall Street on Friday after the United States announced plans to expand its trade war to Mexico.
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The collapse almost guarantees that the market will end in May with its first monthly loss of 2019.
The new front in the commercial war is affecting especially the automobile manufacturers. Many of them import vehicles to the United States from Mexico.
Technological actions led the decline. They have been hardest hit by rhetoric and escalating tariffs in the US trade war with China. Cisco fell 1.9% and Microsoft fell 1.3%.
Banks were among the sharpest declines because higher bond prices caused yields to fall. Investors have been investing more money in bonds due to concerns that economic growth will be affected by the current trade war. Lower interest rates make loans less profitable for banks. Citigroup fell 1.4% and Bank of America fell 1.2%.
Energy companies are sinking under the weight of falling oil prices. The price of crude oil fell by 2.4%. Occidental Petroleum fell 2.2% and Valero Energy fell 3%.
Public services fared better than most sectors and ranged between small gains and losses. The sector is considered less risky by investors when economic growth is threatened.
Investors have been fleeing to safer farms throughout the month. The change to public services and bonds accelerated in early May, after the United States and China interrupted negotiations. The United States then applied more tariffs to Chinese products along with a ban on technology sales. That caused China's retaliatory tariffs and threats to other key resources.
A handful of end-of-season earnings reports are also helping to move certain stocks. Williams-Sonoma rose thanks to a solid first-quarter financial report, while retailer Gap plummeted with weak results.
RESULT: The S & P 500 index fell 0.7% at 11:35 a.m. The Dow Jones Industrial Average fell 211 points, or 0.8%, to 24,954. The Nasdaq fell 0.9%.
ANALYST TAKEN: the new tariffs on Mexican products shocked investors who were already nervous about a global trade war that held back economic growth.
"Clearly, the markets were blinded and completely unprepared," said Cliff Hodge, chief investment officer at Cornerstone Wealth.
The biggest risk, he said, is that continued trade negotiations could cause a global recession. Automotive companies and agricultural companies will have more difficulty pbading on costs to consumers. In addition, investors are worried about a further escalation of global trade.
"The fact that the president is willing to use tariffs as a weapon can really damage business confidence," Hodge said. "You have to be wondering, who's next?"
TRADE WAR COMMERCIALS: The new front in the US trade war UU It will have a big impact on companies that do everything from cars to beers and tacos.
General Motors fell 4.5%, Ford lost 2.8% and Fiat Chrysler fell 4.7%. These companies import vehicles from Mexico to the United States.
The railway operators are also being squeezed. Kansas City Southern fell 5.8%. The company gets almost half of its income from Mexico every year. Union Pacific also lost 1.4%.
The chipotle fell by 1.8%. The rise in avocado prices could harm the chain of Mexican restaurants. Constellation Brands, which makes Corona and Modelo, fell 6.8%.
The companies that sell food and groceries are also feeling the pressure. Walmart fell 1.3% and Kroger fell 1.1%.
MAY, MAY: May marks the first monthly loss for the market in 2019. That is a sharp change from the stock record so far this year. The S & P 500 hit a record high on April 30, when investors had taken into account a resolution of Trump's trade wars.
Since then, investors have fled to safe games, such as public services and bonds. Technology stocks, which led earnings throughout the year, were among the biggest losers in May. The Nasdaq heavy technology fell by 7.3% and technology companies within the S & P 500 fell 8.1%.
Public utility companies, which have lagged behind in the market, were among the best performers in May. They threw "merely" 1.9%. Meanwhile, real estate shares recorded a gain of 1%, the only winners this month.
STEP INTO ONE STEP: Garment and clothing retailer Gap plunged 14.9% after the company gave investors a weak earnings report and cut its profit forecast for the full year.
The disappointing results and estimates come three months after the retailer said it was creating two independent listed companies: the low-priced Old Navy and a still-named company that will include the iconic Gap and Banana Republic brand, as well as The lesser-known names of Athleta, Intermix and Hill City.
Total sales and sales at established stores fell during the quarter. Sales at its Gap stores of the same name fell by 10%.
"This quarter was extremely challenging, and we are not entirely satisfied with our results," said Art Peck, president and CEO of Gap in a statement.
RESULTS OF THE ACT: Williams-Sonoma rose 10.4% after the kitchenware and home furnishings vendor reported surprisingly strong financial results in the first quarter and raised its earnings forecast for the year.
The company also attracted a wave of customers to its stores during the quarter. Sales at established stores increased 3.5%, eliminating Wall Street forecasts of a 1.6% increase.