US stocks drop toward worst day since April

NEW YORK — A monthslong calm on Wall Street is shattering Friday, and U.S. stocks are falling after President Donald Trump threatened to crank tariffs much higher on China. The S&P 500 sank 2% and was heading toward its worst loss since April. The Dow Jones Industrial Average dropped 598 points, or 1.3%, after earlier tumbling as many as 644 points. The Nasdaq composite was down 2.6%, as of 1:20 p.m. Eastern time. Stocks had been heading for a slight gain in the morning, until Trump took to his social media platform and said he's considering "a massive increase of tariffs" on Chinese imports. He's upset at restrictions China has placed on exports of its rare earths, which are materials that are critical for the manufacturing of everything from consumer electronics to jet engines. "We have been contacted by other Countries who are extremely angry at this great Trade hostility, which came out of nowhere," Trump wrote on Truth Social. He also said "now there seems to be no reason" to meet with China's leader, Xi Jinping, after earlier agreeing to do so as part of an upcoming trip to South Korea. The ratchet higher in tensions between the world's two largest economies caused a widespread drop on Wall Street, with four out of every five stocks within the S&P 500 falling. Everything sank from Big Tech companies like Nvidia and Apple to stocks of smaller companies looking to get past uncertainty about tariffs and trade. U.S. stocks were already broadly facing criticism that their prices had shot too high after a nearly relentless 35% run from a low in April sent the S&P 500 to record heights. Critics say the market looks too expensive after prices rose much faster than corporate profits. Worries are particularly high about companies in the artificial-intelligence industry, where pessimists are making comparisons to to the 2000 dot-com bubble that ultimately imploded. For stocks to look less expensive, either their prices need to fall, or profits need to rise. Levi Strauss dropped 11.7% for one of the market's largest losses, even though it reported a stronger profit for the latest quarter than analysts expected. Its forecast for profit over the full year was also within range of Wall Street's estimates, but the jeans and clothing company could simply be facing the challenge of heightened expectations. Its stock price came into the day with a stellar surge of nearly 42% for the year so far. Some of Friday's strongest action was in the oil market, where the price of a barrel of benchmark U.S. crude sank 4.2% to $58.95. It fell as a ceasefire between Israel and Hamas came into effect in Gaza, raising hopes for less violence in the Middle East. An end to the war could remove worries about disruptions to oil supplies, which had kept crude's price higher than it otherwise would have been. Losses accelerated following Trump's threat of tariffs, which could restrict global trade and the economy. Brent crude, the international standard, dropped 3.6% to $62.84 per barrel. In the bond market, the yield on the 10-year Treasury sank to 4.05% from 4.14% late Thursday. It had already been lower before Trump made his threats, as a report from the University of Michigan suggested that sentiment among U.S. consumers remains in the doldrums. "Pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers' minds," according to Joanne Hsu, director of the Surveys of Consumers. "At this time, consumers do not expect meaningful improvement in these factors." The job market has slowed so much that the Federal Reserve cut its main interest rate last month for the first time this year. Fed officials have also penciled in several more cuts to rates through the end of next year to give the economy more breathing room. But Chair Jerome Powell has also said they may have to shift course if inflation stays high. That's because lower interest rates can push inflation even higher. One encouraging signal from the University of Michigan's preliminary survey said consumers' expectations for inflation in the coming year edged down to 4.6% from 4.7% the month before. While that's still high, the direction of change could still help the Fed by limiting upward pressure on inflation. In stock markets abroad, indexes fell across much of Europe and Asia. Hong Kong's Hang Seng fell 1.7%, and Japan's Nikkei 225 dropped 1% for two of the bigger moves. But South Korea's Kospi leaped 1.7% after trading reopened following a holiday. ___ AP Writer Teresa Cerojano contributed.