New York saw a further dip in the stock market on Tuesday, triggered by a new twist in President Donald Trump’s ongoing trade disputes. Wall Street briefly found itself 10% beneath the record high it reached last month. The day’s trading was characterized by unpredictable volatility, a pattern that has been persistent in recent weeks.
The S&P 500 closed with a 0.8% loss, having swung between a modest rise and a 1.5% drop. By the end of trading, this key barometer of market health stood 9.3% below its peak, nearly touching the 10% mark that signifies a ‘correction’ in investor terms. The Dow Jones Industrial Average experienced a loss of 478 points, equivalent to 1.1%, and the Nasdaq composite ended the day down by 0.2%.
Such erratic movements have become frequent as market players navigate the uncertainties surrounding Trump’s trade policies. Investors are left questioning the extent of the economic upheaval Trump is willing to risk to implement his tariffs and other policies. In typical fashion, official statements issued on Tuesday from Trump and his aides added little clarity.
Early in the trading day, stocks began to drop after President Trump announced he would increase planned tariffs on Canadian steel and aluminum. The decision followed actions from a Canadian province that responded to Trump’s initial tariff threats against one of the U.S.’s key trading allies. Trump admitted the tariffs might cause some “disturbance” in the economy, but specifics about the potential economic and market impacts were elusive, as White House press secretary Karoline Leavitt avoided detailing any threshold of market pain the administration was prepared to accept.
Despite these tensions, Trump floated the idea publicly that Canada should become another state of the U.S., suggesting such a move would eliminate tariff disputes entirely. Meanwhile, Ontario’s premier hinted at easing electricity charges that had upset Trump, prompting a brief, upward stock market shift as Trump suggested possibly returning Canadian tariffs to 25%.
However, this fleeting recovery was swiftly reversed, leading to renewed declines at the close of the market.
Tuesday’s volatility also included renewed worries about economic indications, as Trump’s alternating approaches to trade policies sow uncertainty and pessimism among both consumers and businesses across the U.S. Tariffs could disrupt the economy directly by inflating consumer prices and complicating international trade relations. Even if the fiscal impact is less severe than feared, the resultant uncertainty could deter investment and spending by firms and consumers alike, potentially stalling economic momentum.
Delta Air Lines saw its share price drop by 7.3% after revealing changes in customer confidence have already impacted the demand for bookings. The airline subsequently halved its growth forecast for early 2025 revenues. Southwest Airlines followed suit by trimming revenue trend predictions, citing factors like decreased government travel and California wildfires. Its shares, however, climbed by 8.3% following new charges on checked luggage and other measures.
Oracle experienced a 3.1% fall due to quarterly earnings and revenue below analyst forecasts. In contrast, several major tech companies helped stabilize the market somewhat. Elon Musk’s Tesla rose 3.8%, buoyed by Trump’s support for Musk’s initiative. Tesla has faced sales pressures amid Musk’s federal spending cut efforts, although its stock remains down 42.9% for the year.
Other major tech firms, which have previously driven market highs, exhibited smaller gains. Nvidia, for instance, rose by 1.7% but still bears a 19% year-to-date loss amidst declines in stocks previously inflated by an AI technology hype.
Overall, the S&P 500 shed 42.49 points to 5,572.07, the Dow decreased by 478.23 to 41,433.48, and the Nasdaq composite lost 32.23 to 17,436.10. European and Asian markets, having generally outperformed the U.S. this year, mirrored these losses. However, Shanghai saw a slight increase of 0.4%, whereas Hong Kong remained largely flat as China’s national congress concluded with proposals to boost its cooling economy.
Bond markets saw some recovery from earlier tumbles, with the 10-year Treasury yield rising to 4.28% from 4.22% on Monday. Earlier in January, it nearly hit 4.80% before dipping amidst concerns over the U.S. economic outlook.
Data released on Tuesday also indicated a solid U.S. job market, showing 7.7 million job vacancies by the end of January, in line with economists’ expectations. Despite the stock market’s recent turmoil, this supports evidence of a robust close to the previous economic year.