Markets tumble as trade tensions escalate, with the S&P 500 dropping 1.8% and tech stocks hit hardest
On Monday, US stocks dropped sharply, wiping out more of the gains made since Donald Trump’s election in November.
According to BNN Bloomberg, the decline followed Trump’s announcement that tariffs on imports from Canada and Mexico would take effect within hours.
The S&P 500 dropped 1.8 percent, erasing much of the gains made since Trump's election, after he stated there was “no room left” for negotiations.
This move, following a previous delay, heightened investor concerns over trade policy and its economic impact.
Financial markets responded with sharp losses. The Dow Jones Industrial Average fell 649 points, or 1.5 percent, while the Nasdaq composite plunged 2.6 percent.
Monday's decline cut the S&P 500's post-election gain down to just over 1 percent from a previous peak of more than 6 percent.
The selloff came after weaker-than-expected US economic data and growing concerns that tariffs would further slow growth.
Economic indicators signaled trouble, particularly in manufacturing. While overall activity continued to expand, it did so at a slower pace than expected. More concerningly, manufacturers reported a contraction in new orders, while production stabilized and hiring slowed.
According to Timothy Fiore, chair of the Institute for Supply Management's manufacturing business survey committee, “Demand eased, production stabilized, and destaffing continued as panelists' companies experience the first operational shock of the new administration’s tariff policy.”
Rising costs linked to tariffs have also fueled concerns over inflationary pressures.
Investors had anticipated Trump would use tariff threats as leverage for negotiations rather than follow through with full implementation.
The decision to move forward with tariffs on Canada and Mexico injected uncertainty into the market, affecting sectors heavily reliant on trade.
Technology stocks suffered the steepest losses, with Nvidia tumbling 8.8 percent and Tesla down 2.8 percent.
The broader selloff extended to cryptocurrency-related stocks, despite an initial rally following Trump’s announcement of a crypto strategic reserve.
MicroStrategy fell 1.8 percent, while Coinbase dropped 4.6 percent. Meanwhile, Kroger shares fell 3 percent after the resignation of CEO Rodney McMullen amid an internal investigation.
In the bond market, the yield on the 10-year Treasury fell to 4.16 percent from 4.24 percent before the US manufacturing report’s release, continuing a sharp decline from January’s near 4.80 percent.
Typically, lower yields benefit stocks by making borrowing cheaper, but strategists at Morgan Stanley, led by Michael Wilson, cautioned that the current drop reflects concerns about slowing economic growth rather than monetary easing.
Outside the US, global markets showed mixed results. In China, manufacturers reported an increase in orders in February as importers rushed to buy goods ahead of the tariff hike.
A Chinese state media report indicated Beijing is considering retaliation. Trump’s 10 percent tariff on Chinese imports is scheduled to rise to 20 percent on Tuesday, alongside the elimination of the 'de minimis' exemption for imports under US$800.
Hong Kong’s Mixue Bingcheng, a Chinese bubble tea chain, saw its stock surge 43 percent following a US$444m debut, contributing to a 0.3 percent rise in the Hang Seng index.
European markets also performed well, driven by signs of easing inflation. Germany’s DAX jumped 2.6 percent, and France’s CAC 40 gained 1.1 percent, as investors speculated that the European Central Bank may cut interest rates later this week.
While global markets have generally outperformed the US in 2024, Wall Street remains focused on the impact of trade policies and the Federal Reserve’s response to economic slowing amid persistent inflation concerns.
