NEW YORK: Wall Street stocks tanked on Friday (Aug 23) after President Donald Trump vowed a tough response to new Chinese tariffs, escalating the trade war between the world's top two economies amid rising fears of recession.
The Dow Jones Industrial Average sank 623.34 points (2.4 per cent) to 25,628.90, registering its fourth straight weekly loss.
The broad-based S&P 500 fell 75.84 points (2.59 per cent) to 2,847.11, while the tech-rich Nasdaq Composite Index tumbled 239.62 points (3.0 per cent) to 7,751.77.
Markets plunged after Trump said on Twitter he was "ordering" US companies to stop doing business in China after Beijing announced it would impose new tariffs on US$75 billion in US goods.
"Our great American companies are hereby ordered to immediately start looking for an alternative to China," Trump tweeted.
After that, "the trading mood shifted on a dime," said Briefing.com analyst Patrick O'Hare, adding that the S&P 500 dropped 1.6 per cent in just 11 minutes.
Heading into Friday's session, markets had been expecting a key speech from Federal Reserve chairman Jerome Powell to be the major focus of the session.
Powell pledged to act to ensure that the US economic expansion continues but avoided specific promises, including Trump's call for deep interest rate cuts.
Stocks advanced after Powell's remarks, with major indices briefly pushing into positive territory.
But markets reversed course abruptly after Trump fired off a series of tweets blasting Powell for not announcing fresh rate cuts and hitting out at China.
"As usual, the Fed did NOTHING!" Trump said.
"My only question is, who is our bigger enemy, Jay Powel or Chairman Xi?" Trump said, misspelling the Fed chief's name and referring to Chinese leader Xi Jinping.
O'Hare said Trump's tweets shook investor confidence.
"It's possible the market could soon shake this off, as it has in the past, yet the vitriol directed at the Fed chair, and the decree that US companies need to start finding alternatives to China, raised the temperature for a market that was already feverish and not entirely healthy," he said.
While the market's losses were broad-based, Apple led the Dow lower, slumping 4.6 per cent.
A note from Wedbush Securities characterised Trump's directive on leaving China as "a clear shot across the bow" at Apple and chip companies, calling the tariff issue a "nightmare that will not go away."