(Reuters) – U.S. stocks tumbled to a one-month low on Friday after a sharp escalation in U.S.-China trade tensions and a tepid July jobs report renewed fears of slowing economic growth and raised bets of further interest rate cuts this year.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., August 2, 2019. REUTERS/Brendan McDermid

President Donald Trump on Thursday threatened to slap a 10% tariff on $300 billion of Chinese imports from next month, sending global markets tumbling and investors fleeing to safe-havens like U.S. Treasuries and the Japanese yen.

China on Friday said it would not be blackmailed and warned of retaliation.

“The tariff threat was a splash of cold water, the market had became accustomed to the current state of U.S-China trade negotiations, but a hike in tariffs wakes you up to the fact that the trade war is still with us,” said Michael Antonelli, market strategist at Robert W. Baird in Milwaukee.

“If the trade war rhetoric is going to continue to ramp up, then the Fed is going to have to continue to fight that with monetary policy.”

The Labor Department said nonfarm payrolls increased by 164,000 jobs last month and the economy created 41,000 fewer jobs in May and June than previously reported. However, July’s numbers were in line with economists’ expectations.

Technology companies, which get a sizeable portion of their revenue from China, were the hardest hit, down 1.88%, weighed by iPhone maker Apple Inc and chipmakers.

The Philadelphia Semiconductor index slipped 1.61%, while shares of Apple fell 2.4%.

The sudden escalation in trade rhetoric follows the Federal Reserve on Wednesday playing down expectations of further aggressive monetary policy actions after cutting interest rates for the first time in a decade.

Hopes that the Fed would be more accommodative to counter the impact of the bruising trade war had helped Wall Street’s main indexes hit record highs last month.

Traders of short-term interest-rate futures are now pricing in an about 80% chance of a rate cut next month, and an about 70% chance of a further reduction in December, according CME Group’s FedWatch tool. [MMT/]

At 11:18 a.m. ET, the Dow Jones Industrial Average was down 201.88 points, or 0.76%, at 26,381.54, the S&P 500 was down 26.02 points, or 0.88%, at 2,927.54. The Nasdaq Composite was down 117.00 points, or 1.44%, at 7,994.12.

The S&P 500 slipped below its 50-day moving average, a closely watched indicator of short-term momentum, during the session.

The defensive real estate, utilities, and consumer staples sectors were the only S&P sectors trading higher. [O/R]

The second-quarter earnings season is in full swing, with 74.4% of the 355 S&P 500 companies that have reported so far beating profit estimates, according to Refinitiv data.

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NetApp Inc slumped 21.1% after the data storage equipment maker lowered its forecast for the first quarter and 2020, blaming a weakening macro environment.

Declining issues outnumbered advancers for a 2.51-to-1 ratio on the NYSE and for a 2.96-to-1 ratio on the Nasdaq.

The S&P index recorded eight new 52-week highs and 10 new lows, while the Nasdaq recorded 12 new highs and 144 new lows.

Reporting by Amy Caren Daniel in Bengaluru; Editing by Anil D’Silva and Arun Koyyur

Our Standards:The Thomson Reuters Trust Principles.

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