Wall Street faced significant declines as new tariffs imposed by the Trump administration ignited trade tensions with Canada, Mexico, and China. The S&P 500 and Dow Jones Industrial Average both experienced losses that erased post-election gains. Major retailers expressed concerns about profit pressures tied to tariffs. Additionally, analysts are wary of inflation risks affecting economic growth and future interest rate decisions by the Federal Reserve.
On Wall Street, stocks fell sharply on Tuesday, erasing gains made since the recent election. This decline was primarily driven by escalating trade tensions between the U.S. and its key partners, particularly due to new tariffs imposed by the Trump administration on imports from Canada and Mexico and a doubling of tariffs on Chinese goods. These actions prompted retaliatory measures from all three countries, leading to concerns about an economic slowdown worldwide.
The S&P 500 index faced a significant drop, losing nearly 2% at one point before recovering to a 0.1% decline in afternoon trading, where about 66% of its stocks were down. The Dow Jones Industrial Average also saw losses, down 223 points or 0.5%, after initially falling by over 840 points. Conversely, the Nasdaq composite managed a 0.9% uptick, thanks to a rebound in technology stocks like Nvidia and Microsoft, which mitigated broader losses.
European markets experienced substantial declines, with Germany’s DAX index down by 3.5% due to significant losses in the automotive sector. Meanwhile, Asian markets reported more modest decreases. The recent downturn in U.S. stocks has almost nullified the gains achieved since President Trump’s election, which had been supported by expectations for favorable economic policies. Concerns regarding rising tariffs, consumer prices, and potential inflation are unsettling both the economy and the stock market.
Major retailers like Target and Best Buy are voicing concerns over the financial impact of these tariffs. Despite exceeding earnings forecasts, Target’s shares fell by 2.4%, citing significant pressure on profits. Best Buy witnessed a 12.1% drop, with its CEO, Corie Barry, underscoring the importance of international trade to their business and warning of inevitable price increases for consumers due to elevated tariff costs.
The new tariffs impose a 25% tax on imports from Canada and Mexico, alongside a 10% duty on Canadian energy products. The Trump administration has doubled the previous 10% tariff on Chinese imports to 20%. In retaliation, China announced new tariffs up to 15% on U.S. farm products, while Canada plans tariffs on over $100 billion of U.S. goods and Mexico is also expected to follow suit.
As the S&P 500 companies report quarterly earnings, they show an 18% growth for Q4, but Wall Street anticipates a significant cut in growth estimates for the current quarter, from over 11% to about 7%. Consumer spending, a critical driver of U.S. economic growth, appears to be weakening, with households expressing growing pessimism about inflation.
Investors are closely monitoring the Federal Reserve’s response, hoping for continued interest rate cuts in 2025, although recent communications suggest caution amidst tariff uncertainties. The Fed recently raised rates to two-decade highs to control inflation, but has begun cutting rates as inflation trends stabilize, despite concerns that tariffs could rekindle price rises.
In the bond market, Treasury yields displayed mixed movements, with the 10-year yield increasing slightly to 4.21%. This is significantly lower than the previous month’s close to 4.80%. Analysts note that tariffs are influencing market perceptions, with expectations of higher inflation impacting the value of the 10-year note, according to Sam Stovall, chief investment strategist at CFRA. The yield on the 2-year Treasury remained at 3.94%.
The recent turmoil on Wall Street has been significantly influenced by escalating U.S. tariffs and retaliatory measures from trading partners, indicating potential economic instability. Major retailers have flagged the adverse impact of tariffs on profits, signaling broader market concerns. As the Federal Reserve navigates interest rate decisions amidst inflation threats, the overall sentiment reflects a cautious outlook moving forward.
Original Source: wsvn.com
