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Markets

Stocks drop most in 6 weeks on trade war tension

U.S. stocks tumbled the most in six weeks and Treasuries rallied as investors shifted focus from the Federal Reserve to the threat of an escalating trade war with China that has the potential to disrupt global growth.

The benchmark S&P 500 index slumped the most since early February, falling 2.52% to 2,643.69, and the Dow Jones industrial average lost 724 points, down 2.93%, after President Donald Trump ordered tariffs on about $50 billion in Chinese goods. The 10-year Treasury yield slid toward 2.8% and the yen advanced as investors sought safe havens. The dollar rebounded.

"The market doesn't like trade wars, the market doesn't like that the Fed is adamant about raising rates," said Matt Schreiber, president and chief investment strategist at WBI Investments. "Yes the economy has been pretty strong, the labor market has less slack, but there's nothing to really get fired up about and try to normalize rates to a level way above where we are."

The threat that a tit-for-tat trade spat with China will erupt and hamper global growth has investors on edge a day after the Fed sought to reassure markets that it's in no hurry to raise rates even as it lifted growth projections for the world's largest economy. Mr. Trump's first trade action directly aimed at China comes as policymakers including IMF Managing Director Christine Lagarde warn of a global trade conflict that could undermine the broadest world recovery in years.

Stocks were also hit earlier when John Dowd resigned as Mr. Trump's lead attorney countering Special Counsel Robert Mueller's Russia probe as the inquiry into possible collusion in the 2016 election intensifies.

Facebook helped pace a decline in the tech sector, falling 2.7%. This week's sell-off in tech stocks is on pace to be the worst since early February.

Elsewhere, West Texas oil fluctuated before falling and the Australian dollar slipped after the country's unemployment rate climbed. The British pound initially jumped after the country's central bank voted 7-2 to maintain interest rates, but pared as investors digested comments from policy makers that weren't overtly hawkish.