Industrial stocks dragged major indexes lower on Monday after China said it would sanction US defense firms over weapons sales to Taiwan.
The country will impose sanctions on Boeing, Raytheon, and Lockheed Martin, as well as people involved in a $1.8 billion deal that the US State Department approved, a Chinese foreign ministry spokesman, Zhao Lijian, said in a statement.
The announcement drove a sharp sell-off of the involved companies’ stocks that broadly pulled industrials into a hefty intraday loss. The corresponding S&P 500 sector sat 2.9% lower as of 12:50 p.m. ET, trailing only energy stocks in what’s poised to be the worst day for stocks in a month. Within the industrials sector, aerospace and defense stocks fell more than 3%.
Boeing fell as much as 4.4%. Raytheon and Lockheed Martin fell 4.3% and 3.2% at their intraday lows.
The news disproportionately slammed the Dow Jones industrial average, which skews heavier toward industrials than peer indexes. The benchmark sank more than 800 points at intraday lows, on pace for its worst day since early September.
Zhao didn’t specify the sanctions’ timing or severity, saying only that the actions were “necessary measures to safeguard national sovereignty and security interests.”
The Trump administration has previously pressured China through arms deals with Taiwan.
China similarly sanctioned Lockheed Martin after the US approved a $620 million deal with Taiwan involving upgraded surface-to-air missiles in July.
The sector’s slide exacerbated an early market tumble. The chance of Congress enacting a stimulus deal before Election Day has all but disappeared after Democrats and the White House failed to reach an agreement over the weekend. And daily new coronavirus cases in the US surged past 80,000 on both Friday and Saturday, sparking fears of renewed lockdowns and harsh economic fallout.
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