Stocks sell off on escalating trade jitters

Escalating trade tensions sent U.S. stocks to their steepest drop since early April on Monday, as President Donald J. Trump’s threats of more protectionism against major partners were met with Chinese and European vows of retaliation.

The S&P 500 Index fell 1.4%, though comments from National Trade Council director Peter Navarro brought the measure back from losses that had topped 2%. The Dow Jones Industrial Average closed below its 200-day moving average. Selling was heaviest in tech shares, with the Nasdaq 100 Index sinking 2.2%.

Equities tumbled around the world on reports that the U.S. Treasury will propose limits on Chinese technology investment, straining already tense relations between the world’s two largest economies. Mr. Navarro said on CNBC that there were no plans to impose restrictions, sparking a late-day rebound. China and Europe warned the escalating trade war could trigger a global recession.

The selling in American stocks spread from Asia, where equities in Shanghai and Hong Kong declined despite China’s central bank freeing up liquidity in the banking system. European shares also tumbled, with the Stoxx 600 Index down 2.1%. Political concerns hit Italian bonds and stocks after the nationalist League party won municipal elections. Emerging-market equities slid. U.S. crude pushed toward $69 a barrel. After an early surge, Turkey’s lira swung between gains and losses as traders digested Recep Tayyip Erdogan election victory.

The rising tensions have weighed on stocks ahead of the second-quarter earnings season that so far has seen estimates keep rising. Daimler dented that notion last week, warning that tariffs will lower its profits. Germany’s DAX Index was among the worst performers of the region’s stock gauges as data showed business sentiment slipped. Automakers were the big losers after more tariff threats from Mr. Trump at the end of last week.