U.S. stocks fell in a volatile session of trading, after President Donald Trump wrote in a series of Twitter posts that he would be ordering U.S. companies to “immediately start looking for an alternative” to their business operations in China.

This comes after China announced during the pre-market trading session that it would be imposing tariffs on additional U.S. goods as retaliation against the Trump administration’s levies due to take effect September 1.

China’s Finance Ministry said in a statement that it would be imposing tariffs on another about $75 billion worth of U.S. goods, which will be rolled out in two batches on September 1 and December 15. The Trump administration has also previously announced some tariffs on Chinese imports would take effect September 1, while others would hit in mid-December.

Here’s where the markets settled Friday:

• S&P 500 (^GSPC): -2.59%, or 75.84 points

• Dow (^DJI): -2.37%, or 623.34 points

• Nasdaq (^IXIC): -3.00%, or 239.62 points

• 10-year Treasury yield (^TNX): -8 bps to 1.53%

Less than an hour before Trump’s tweets, stocks had been positive after Federal Reserve Chair Jerome Powell called out “significant risks” to the U.S. economy and repeated a pledge to “act as appropriate to sustain the expansion.” Investors largely took this assessment to mean the Fed leader was still open to the idea of easier monetary policy in order to help keep the economy humming.

Powell’s prepared comments, delivered at Fed’s annual Jackson Hole Economic Policy Symposium, come about a month before the Federal Reserve’s next monetary policy meeting, which market participants have hoped will result in the first of several more interest rate cuts.

The Fed’s justification for the July rate cut had centered on staving off global economic risks, and boosting what has now been persistently low inflation in the U.S. With both factors still at play a month later, these may serve as the basis for yet another interest rate cut to support the domestic economy.

“It is clear from [Powell’s] speech that the single biggest factor driving both market volatility, the actual global slowdown, and fears of a U.S. slowdown, is trade policy, both its current stance and uncertainty about the future,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in a note. “In other words, the Fed has been handicapped by Mr. Trump's damaging and capricious trade policy, which has made it very hard for monetary policymakers to take a settled view of where the economy is headed.”

But the market’s conviction that further rate cuts are on the way has itself created a risk, other analysts pointed out.

“To keep the expansion going the Fed has boxed itself in to deliver more rate cuts this year,” Scott Minerd, chairman of Guggenheim Investments, wrote in a note Friday. “This may drive a rally in risk assets based on the market’s perception that liquidity will be plentiful during this period of Fed easing.”

Such a response would mirror that in the late 1990s, when the Fed pivoted from tightening to easing as a result of the Asian financial crisis – leading investors to pump up risk assets, and especially tech stocks, Minerd added.

That said, a spate of regional Fed presidents earlier this week dampened hopes for further policy easing.

Kansas City Fed President Esther George told Yahoo Finance Thursday that “cutting interest rates won’t resolve any uncertainty” surrounding trade, adding that she was monitoring U.S. economic data before committing to a next move in monetary policy.

George had been one of two dissenters from the Fed’s July decision to cut rates. The second dissenter – the Boston Fed’s Eric Rosengren – has also suggested he opposed deeper rate cuts, in an interview earlier in August with Bloomberg.

But remarks from other Fed presidents at Jackson Hole this week suggested the chorus of central bank officials considering a pause on rate cuts has mounted.

Philadelphia Fed leader Patrick Harker told CNBC Thursday that he agreed to July’s rate cut only “somewhat reluctantly,” and said he thinks “we should stay here for a while” on rates. Harker, however, is not a voting member of the Federal Open Market Committee, but he will still be part of the deliberation process during this year’s Fed meetings.

Retail rout

This week’s line-up of retail earnings results ended with a fizzle, with quarterly reports from The Gap (GPS) and Foot Locker (FL) falling short of expectations.

Foot Locker on Friday reported sales results that missed consensus expectations. Closely watched comparable same-store sales rose 0.8%, versus an increase 3.3% expected. Adjusted earnings were 66 cents per share on revenue of $1.77 billion, failing to meet expectations for adjusted EPS of 67 cents on sales of $1.82 billion.

“While our results in the second quarter did come in at the low end of our expectations, we saw improvement in our performance as we moved through each month of the quarter,” Foot Locker CEO Richard Johnson said in a statement. “We remain deeply connected with sneaker and youth culture, and believe this positive momentum exiting the quarter has us well positioned for the back-to-school period and beyond.”

Meanwhile, Gap reported a fourth consecutive quarter of flat to negative same-store sales Thursday after market close, highlighting the retailer’s ongoing challenge to meet consumers’ apparel demands and streamline the business.

Gap comparable same-store sales fell 4% in the quarter, worse than the 3% decline expected, and worsened across each of the Gap, Banana Republic and Old Navy brands in the company’s portfolio. Company net sales of $4.01 billion were just short of consensus expectations. Adjusted earnings of 63 cents, however, topped expectations by 10 cents.

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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