U.S. stocks finished in the red on Tuesday, albeit off session lows, as investors shed stocks following President Donald Trump’s late-Monday threat to slap an additional $400 billion in tariffs on China goods. The announcement represented the latest escalation in a tit-for-tat dispute between the No. 1 and 2 largest economies in the world, rattling investors.

The Dow Jones Industrial Average DJIA, +0.41% fell 1.2%, or 287.26 points, to close at 24,700.21, dragged down by sharp losses in trade-sensitive, industrial stocks Boeing Co. BA, -1.34% , Caterpillar Inc. CAT, +0.44% and 3M Co. MMM, +0.69% . At its intraday nadir, the Dow was down by as many as 420 points.

Tuesday’s decline marked the sixth straight drop for the blue-chip gauge, representing the longest such skid since March 2017, a string of down days that has erased all of 2018’s gains thus far. The Dow is down about 0.1% year to date.

Read:The result of all the volatility in 2018’s stock market: Nothing

The S&P 500 SPX, +0.57% fell 11.18 points, or 0.4%, to 2,762.57. The Nasdaq Composite Index COMP, +0.82% shed 21.44 points to 7,725.59, a drop of 0.3%.

As has recently been the case in “risk off” sessions, the only groups in positive territory were utilities, up 1.1%, telecommunications, gaining 1.4%, real estate, with a rise of less than 0.1%, and consumer staples, 0.5% higher on the session. All of those sectors are considered defensive groups. Materials and industrials stocks, both of which have an outsize impact to trade uncertainty, both tumbled by around 2%.

Don’t miss:Should investors favor cyclical or defensive stocks for the rest of the year? Analysts disagree

What’s driving markets?

After Beijing’s retaliation against U.S. planned tariffs on $50 billion worth of Chinese imports, Trump asked U.S. Trade Representative Robert Lighthizer late Monday to identify $200 billion more in Chinese products that could be subject to tariffs of 10%. The U.S. president also threatened to find $200 billion more worth of goods if China tried to retaliate against those additional tariffs.

A spokesperson from China’s Ministry of Commerce said China will have no choice but to take comprehensive measures in response to the U.S.’s trade moves, the state-run Xinhua News Agency reported.

Trump’s trade adviser Peter Navarro said Tuesday that tariffs against China will be “ultimately bullish” for American businesses, as the administration tries to bring “structural change.”

Investors have for months been concerned that rising trade tensions could devolve into a sizable headwind for global growth going forward, particularly at a time when U.S. gross domestic product is expected to decelerate—but remain positive—over the coming years.

Read more:Escalating U.S.-China trade spat comes at a bad time for global growth, economist says

Asia had a brutal session, with Chinese shares suffering their worst close in two years. Suppliers to Apple Inc. AAPL, +1.92% took hits after a report on Monday that the company’s chief executive, Tim Cook, had visited the White House last month to warn that imposing tariffs on Chinese goods could hurt the iPhone maker. Apple fell 2.1%.

What are strategists saying?

“This is bad…real bad, unless this is gamesmanship as in the so called ‘Art of the Deal.’ Either way, U.S. companies are more protected from market fallout from trade barriers than other developed countries, which has allowed the U.S. to take charge on these tariffs,” wrote Voya Investment Management strategists Doug Coté and Karyn Cavanaugh in a research note Tuesday, referring to the mounting trade tensions.

Which stocks are in focus?

Shares of Netflix Inc. NFLX, +1.15% finished at a fresh all-time high up 3.7% and above $400, bucking the downtrend for much of the broader market as the entertainment-streaming company received a bevy of analyst price-target upgrades.

Snap Inc. SNAP, -2.42% shares lost 5.3% after an analyst lowered his revenue estimate for the company in the current quarter and in the years ahead, seeing a slightly lower daily-active-user count and average ad revenue per user.

Tesla Inc.‘s TSLA, -0.09% stock fell 4.9%. Chief Executive Officer Elon Musk claimed that an employee attempted to sabotage the car maker in an email sent to employees Sunday night, according to a report from CNBC.

Cotiviti Holdings Inc.’s US:COTV shares jumped 10.3% after Verscend Technologies Inc., a portfolio company of private-equity firm Veritas Capital, agreed to buy the company for $4.9 billion.

Foundation Medicine Inc. US:FMI shares surged nearly 29% after Swiss health care group Roche Holding AG ROG, -1.30% announced a $2.4 billion deal to buy the remaining shares of the genomic profiling group that it doesn’t already own.

Blue Apron Holdings Inc. APRN, +5.46% shares rose by 2.2%. The meal-kit company named a new chief supply chain officer.

Micron Technology Inc. MU, -0.08% rose by 1.4% a day before it reports its quarterly results.

Which economic reports are in focus?

Housing starts data for May surged to an 11-year high, coming in modestly above expectations.

Check out:MarketWatch’s Economic Calendar

What are other markets doing?

European stocks SXXP, -0.68% SXXP, -0.68% ended lower across the board on those trade tensions. In Asia, the Shanghai Composite SHCOMP, -1.72% closed down 3.8%. The Nikkei 225 index NIK, -1.10% slid 1.8% as investors sought the perceived safety of the Japanese yen USDJPY, +0.04% , which surged 0.7% against the dollar to ¥109.81.

The ICE U.S. Dollar Index DXY, +0.04% was up 0.3% to 95.093, with gains stemming from a sharp loss for the British pound GBPUSD, +0.17% , which broke below $1.32.

Read:In Germany, Merkel wins 2-week reprieve over migrant crisis

SXXP, -0.68% Gold futures US:GCM8 fell $1.50, or 0.1%, to settle at $1,278.60, and the U.S. oil benchmark US:CLN8 finished 1.2% lower at $65.07 a barrel.