U.S. stocks ended sharply lower on Thursday, with the Dow Jones Industrial Average slumping over 700 points, nearly 3 percent, as the U.S. President Donald Trump's announcement to impose tariffs on imported goods from China triggered a major market sell-off.
The Dow lost 724.42 points, or 2.93 percent, to 23,957.89. The S&P 500 decreased 68.24 points, or 2.52 percent, to 2,643.69, with seven of its 11 sectors dropping over 2 percent. Meanwhile, the tech-heavy Nasdaq Composite Index was down 178.61 points, or 2.43 percent, to 7,166.68.
"I believe that most of today's downward move was precipitated by President Trump's call for increased tariffs on Chinese imports," Peter Costa, President of Empire Executions, Inc., a boutique trading firm on the floor of the New York Stock Exchange (NYSE), told Xinhua on Thursday.
Despite strong warnings from business groups and trade experts, Trump on Thursday signed a memorandum that could impose tariffs on up to 60 billion U.S. dollars of imports from China, the latest unilateral move that poses a threat to global trade.
"The numbers may seem small at the outset considering the size of U.S.-China trade but the fear of an escalating trade war has investors worried," said Costa, who has been a veteran trader at the NYSE since 1981.
"If you look at it historically, no one has ever won a trade war and those trade wars, have on an occasion morphed into something much larger and much more dangerous," he added.
Official data showed that China's trade volume with the United States expanded 15.2 percent in 2017 to 3.95 trillion yuan (623.9 billion U.S. dollars).
U.S. trade associations and major retailers have been warning the administration in recent weeks that any additional broad-based tariff would in fact hurt U.S. consumers and companies.
Following the tariff announcement, shares of Boeing and Caterpillar, two U.S. multinationals that rely heavily on the Chinese market, declined 5.19 percent and 5.71 percent, respectively.
The Cboe Volatility index (VIX), widely considered the best gauge of fear in the market, rallied 30.68 percent to 23.34 in late trading on Thursday.
Lisa Erickson, head of traditional investments at U.S. Bank Wealth Management, said Thursday on CNBC, "There is definitely a lot of fear going on in terms of a trade war. What will happen depends on the details of what goes forward and whether (the tariff plan) becomes more of a negotiating tactic."
She warned that if the United States chooses to be more protectionist, "there could be more of a dramatic sell-off going forward in the markets, in addition to the reactions we have already seen."
U.S. equities were also under pressure on Thursday as the technology sector continued to pull back in the wake of Facebook's data leak scandal.
The social media giant's stocks have slumped over 11 percent in the past four sessions, after reports showed that a data research firm called Cambridge Analytica had gathered data from 50 million Facebook profiles without users' permission.
Moreover, traders were digesting the latest decision from the Federal Reserve.
The U.S. central bank on Wednesday raised the benchmark interest rate by 25 basis points and signaled two more rate hikes in 2018, citing a "strengthened" economic outlook in recent months.
Fed officials widely expect that the U.S. economy would grow at a faster pace this and next year, driven by fiscal stimulus and improved overseas demands.
Many analysts interpreted the Fed's tone as "a little bit hawkish," which raised concerns that the central bank may speed up in tightening the policy, thus possibly putting more weight on the already vulnerable stock market in the future.