Stocks dropped Tuesday as weak manufacturing data added to fears of an escalating tariff war between the world’s two largest economies.
The Institute for Supply Management announced Tuesday morning that its purchasing managers index, a closely watched leading economic indicator, fell from 51.2 percent in July to 49.1 percent in August.
“It’s obviously a sign the manufacturing sector is in recession,” Peter Cardillo, chief market economist at Spartan Capital Securities in New York, told The Post. “That leaves the consumer the only strong pillar of the economy.”
The PMI’s dip below 50 — a signal that the manufacturing economy is contracting — was the first since early 2016.
The news sent the Dow Jones Industrial Average, already struggling with the weekend complications of the trade war, down more than 400 points Tuesday before a partial recovery reduced the loss to 336 points, or 1.3 percent, around midday.
On Sunday, the Trump administration began collecting 15 percent tariffs on more than $125 billion in Chinese imports, while China imposed new charges on US products.
China stepped up the trade war Monday by filing a complaint over US import duties to the World Trade Organization, claiming the most recent round of tariffs violated a consensus reached by both countries in Osaka, Japan.
Early Tuesday, the president attempted to apply even more pressure on China to cut a trade deal before the 2020 election.
“While I am sure they would love to be dealing with a new administration so they could continue their practice of ‘ripoff USA’($600 B/year), 16 months PLUS is a long time to be hemorrhaging jobs,” he tweeted.
Trump then addressed what would happen to China should he win a second term. “Deal would get MUCH TOUGHER! In the meantime, China’s Supply Chain will crumble and businesses, jobs and money will be gone!”
Trade-sensitive stocks took the biggest hits, with Caterpillar declining 2.7 percent in midday trading, while United Parcel Service was off 2.0 percent and Apple fell 2.0 percent.
Boeing Co. shares weighed the most on the Dow, falling 3.5 percent after United Airlines and American Airlines announced the cancellation of their 737 MAX flights would be extended through December.
The troubled outlook pushed the Fed funds futures market to price in more of a rate cut — 25 basis points to 50 basis points, said Quincy Krosby, chief market strategist at Prudential Financial.
The flight from equities sent investors to safer assets, with the price of gold up 1.2 percent and rising demand for 10-year Treasury notes sending their yield to its lowest level since July 2016.
The British pound, meanwhile, sank to its lowest level in 34 years after Prime Minister Boris Johnson told lawmakers not to thwart his plans for quitting the European Unionwith or without a deal on Oct. 31.