The major domestic equity indexes were lower on Tuesday as a sharp escalation in the trade dispute between the United States and China rattled markets and put the Dow Jones Industrial Average back in negative territory for the year.

Trump threatened to impose a 10 percent tariff on another $200 billion of Chinese goods, and Beijing warned it would retaliate. Trump said his move followed China’s decision to raise tariffs on $50 billion in U.S. goods, which came after the White House announced similar tariffs on Chinese goods on Friday.

The three major indexes pared losses from earlier in the session. The Dow briefly dropped below its 100-day moving average but rebounded, though the index ended the session below its 50-day moving average. Given the escalating rhetoric on trade, the decline in share prices was actually relatively small.

The CBOE Volatility Index hit nearly a three-week high of 14.68 points, before easing to 13.35.

The small-cap Russell 2000 index, whose components are more domestically focused than large-cap companies, edged up 0.1 percent.

Sectors seen as bond proxies due to their high dividend yields, such as utilities, telecoms and consumer staples, advanced.

Shares of Boeing, which has been a proxy for trade-war tensions with China, fell 3.8 percent, weighing the most on the Dow. Construction equipment maker Caterpillar closely followed with a 3.6 percent drop.

The declines weighed on the S&P industrials index, which fell 2.1 percent, its largest one-day percentage drop in nearly two months.

Shares of chipmakers, which depend on China for a large portion of their revenue, also fell. The Philadelphia Semiconductor index was down 1.2 percent.

Tariff worries dragged FedEx down 2.0 percent. The logistics company’s shares were the largest drag on the Dow Transports, which fell 1.7 percent. FedEx is scheduled to issue its quarterly report after the bell on Tuesday.

Approximately 7.12 billion shares changed hands on the major domestic equity exchanges, as compared to the 6.95 billion share average over the past 20 trading days.

End of An Era

The Dow Jones Industrial Average is losing General Electric, the lone original component of the venerable blue-chip index that debuted in 1896.

S&P Dow Jones Indices said on Tuesday that GE would be pulled from the index before the stock market opens on June 26 and replaced by Walgreens Boots Alliance.

GE fell 1.5 percent in extended trade following the announcement, furthering a long decline this year that reflects concerns on Wall Street over the company’s disappointing quarterly results. Meanwhile, Walgreens Boots Alliance rose 2.2 percent after the announcement.

GE’s share price significantly underperformed the broader market under the leadership of former Chief Executive Officer Jeffrey Immelt, who was replaced last year by John Flannery. The pain began in earnest as the financial crisis elevated losses at GE’s Capital unit.

Some index watchers had expected GE’s troubles to lead to its removal from the elite 30-stock Dow. Changes to the Dow are made on an as-needed basis and selection is not governed by quantitative rules, according to published methodology for the index.

Housing Starts Rise

Homebuilding surged to near an 11-year high in May amid an acceleration in both single-family and multi-family home construction, but a second straight monthly drop in permits suggested housing market activity would remain moderate.

According to a report released by the Commerce Department on Tuesday morning, housing starts were up 5.0 percent to a seasonally adjusted annual rate of 1.350 million units last month. It was the highest level since July 2007.

Data for April was revised slightly to show starts falling to a rate of 1.286 million units instead of the previously reported pace of 1.287 million units.

Building permits fell 4.6 percent to a rate of 1.301 million units, the lowest level since September 2017.

Single-family homebuilding, which accounts for the largest share of the housing market, increased 3.9 percent to a rate of 936,000 units last month.

Single-family home construction rose in the Northeast and Midwest but fell in the South and West. It has lost momentum since hitting a pace of 948,000 units last November, which was the strongest level in more than 10 years.

Permits to build single-family homes fell 2.2 percent in May to a pace of 844,000 units, an eight-month low. With permits lagging starts, single-family homebuilding could slow in the months ahead.

A survey on Monday indicated confidence among single-family homebuilders fell during June, with builders “increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability.”

According to the survey, more expensive lumber had “added nearly $9,000 to the price of a new single-family home since January 2017.”

The Trump administration in April 2017 imposed anti-subsidy duties on imports of Canadian softwood lumber. The higher cost of lumber together with a lack of land and labor has worsened an acute shortage of homes for sale, hobbling the housing market.

Residential investment contracted in the first quarter. The housing market continues to lag overall economic growth, which appears to be accelerating in the second quarter after hitting a speed bump at the start of the year.

Starts for the volatile multi-family housing segment rebounded 7.5 percent to a rate of 414,000 units in May. Permits for the construction of multi-family homes fell 8.8 percent to a pace of 457,000 units.

The housing shortage could ease, with more houses under construction and being completed. Housing completions increased 1.9 percent to a rate of 1.291 million units, the highest level since January 2008. The number of single-family houses completed last month was the most since March 2008.

Realtors estimate that housing start and completion rates need to be in a range of 1.5 million to 1.6 million units per month to plug the inventory gap.

The stock of housing under construction edged up 0.2 percent to 1.127 million units, the highest level since July 2007. Single-family homes under construction last month increased 0.2 percent to 515,000 units, the highest level since May 2008.