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Stocks opened lower on Monday as the trade war between the U.S. and China escalated with further tariffs and the cancellation of trade talks between the two countries is cancelled.
The Dow Jones Industrial Average fell 64 points with McDonald’s and Microsoft lagging. The S&P 500 dipped 0.3 percent while the Nasdaq Composite dropped 0.7 percent. Declines in Facebook, Amazon, Netflix, Google-parent Alphabet and Apple pushed the Nasdaq lower.
The Wall Street Journal first reported late Friday that China had cancelled talks with the U.S. on trade as both countries impose tariffs on billions of dollars worth of their goods. The two sides were set to meet in order to dial back tensions, but the Journal reported that China rescinded a proposal to send two delegations to Washington. Other news outlets matched The Journal’s reporting throughout the weekend.
On Monday, a 10 percent U.S. levy on $200 billion worth of Chinese goods came into effect. The 10 percent rate is also set to rise to 25 percent by year-end. China has retaliated, targeting duties on more than 5,000 American goods worth a total of $60 billion.
The move lower on Monday comes after the Dow and S&P 500 posted record highs on Friday and notched solid weekly gains.
“They did it in a very healthy way,” said Art Hogan, chief market strategist at B. Riley FBR. He noted that money rotated out of defensive stocks and some of the high-flying tech shares into financials. “I think we can see another bid in financials if the 10-year can hold above 3 percent.”
The benchmark 10-year Treasury note yield traded at 3.072 percent on Monday.
Energy shares rose, meanwhile, as Brent crude broke above $80 per barrel to hit its highest level since 2014 after OPEC leaders signaled they would not be boosting output immediately. The Energy Select Sector SPDR ETF (XLF) rose 1.6 percent.
“It’s clear that the OPEC meeting didn’t have a lot of talk about new supply coming,” said Hogan. The boost is coming more from “the supply side, but demand is still strong, which is a positive” for oil and energy stocks.
Excitement from the deals space kept the broader market’s losses in check. Comcast outbid Twenty-First Century Fox on Saturday in a $39 billion takeover of U.K. broadcaster Sky, submitting a much higher bid in a three-round auction. On Monday, the U.K. broadcaster recommended its shareholders to accept an offer from Comcast.
Meanwhile, SiriusXM announced it would buy Pandora in a stock deal worth $3.5 billion. The deal initially sent Pandora shares ripping nearly 20 percent higher in the premarket before trading about 12 percent higher.