Stocks slumped on Tuesday as worries about U.S.-China trade relations grew after U.S. trade representative Robert Lighthizer confirmed plans to hike tariffs on China.
The Dow Jones Industrial Average plunged 1.79%, the S&P 500 lost 1.65%, while the Nasdaq Composite fell 1.96%. That was the biggest loss for the Dow since Jan. 3 and the biggest losses for both S&P 500 and Nasdaq since March 22.
Lighthizer stoked U.S.-China trade war fears, sending the broader market into a steep decline after suggesting that President Donald Trump's threat to raise tariffs on $200 billion worth of Chinese goods to 25% from 10% would come into effect on Friday at 12:01 AM ET (04:01 GMT).
Analysts, while still expecting a trade deal as the ultimate outcome, appeared to take the threat of an escalation in U.S.-China trade tensions more seriously, having shrugged it off a day earlier as a ploy for Washington to gain the upper hand in talks with Beijing, which are believed to be in the final stages.
"A trade deal with China is still the best bet, but the risk of a delay or even a disaster has risen ... if China calls Trump's bluff, markets will be in for a very rough ride," Pantheon Macroeconomics said in a note.
A slump in industrials captured the jitters on trade, with Caterpillar (NYSE:CAT) and Boeing (NYSE:BA), bellwethers of trade given their large international exposure, falling 2.2% and 3.9%, respectively.
Negative sentiment on Boeing was exacerbated after Barclays) downgraded the stock to equal weight from overweight on Tuesday. Its survey of airline passengers found that many people will avoid the 737 Max for a prolonged period once the grounded aircraft is deemed flightworthy.
Boeing was responsible for 97 points of the Dow's loss, about 21% of the total.
Chipmakers, vulnerable to slowdown in China, which accounts for about a fifth of global semiconductor revenue, were also hurt by the ongoing trade concerns, dragging the broader tech sector deep into the red.
NXP Semiconductors (NASDAQ:NXPI), Micron Technology (NASDAQ:MU) and Nvidia (NASDAQ:NVDA) fell more than 3% on the day.
Energy stocks, meanwhile, came under pressure, falling 0.63% after U.S. oil prices settled 1.4% lower on concerns that an escalation in trade tensions could stifle China's economic rebound, limiting global oil demand.
Healthcare stocks were also a major drag on the broader the market, led by a rout in Mylan (NASDAQ:MYL) as the drugmaker missed revenue expectations and failed to deliver an update on its strategic review.
But there were some positives in the market, with American International Group (NYSE:AIG) delivering a first-quarter earnings beat thanks to lower costs and higher underwriting growth. Its share closed 6.8% higher.
On the economic front, data showing better-than-expected U.S. job openings for March did little to improve sentiment on stocks.
Top S&P 500 Gainers and Losers Today:
American International Group (NYSE:AIG), Henry Schein (NASDAQ:HSIC) and Everest Re Group (NYSE:RE) were among the top S&P 500 gainers for the session.
Mylan (NASDAQ:MYL), Mosaic (NYSE:MOS) and Regeneron Pharmaceuticals (NASDAQ:REGN) were among the worst S&P 500 performers of the session.
