In New York, U.S. stocks experienced significant turmoil on Tuesday with a dramatic shift in fortunes. Initially, Wall Street opened to a booming start, but by the close, it faced losses as investors grappled with uncertainty over President Donald Trump’s escalating trade dispute.
After a promising start with a 4.1% rise, which would have made it the best day in years, the S&P 500 saw a sharp decline. The index plunged to a 3% loss before rallying slightly to close 1.6% down. This left the S&P 500 nearly 19% below its peak reached in February, impacting many investors’ 401(k) plans significantly.
The Dow Jones Industrial Average saw a steep fall as well. The index shed 320 points, or 0.8%, down from an earlier surge of 1,460 points. Meanwhile, the Nasdaq composite experienced a sharper drop of 2.1%.
The volatile day came after a global upswing in stock markets earlier, with indices climbing 6% in Tokyo, 2.5% in Paris, and 1.6% in Shanghai. Despite these gains, analysts had warned of continuing volatility, not only in upcoming days but even within hours.
The ongoing uncertainty revolves around President Trump’s trade policies and their duration. Persistent high tariffs could inflate prices for American consumers and slow economic growth, potentially leading to a recession. However, rapid negotiation and reduction of these tariffs might prevent such an outcome.
Investors clung to the hope of potential negotiations, which spurred the morning rally. Trump announced that talks with South Korea’s acting president suggested the possibility of a beneficial deal between the two nations. He mentioned that South Korea’s top negotiators are on their way to the U.S. for discussions and expressed optimism about broader international trade negotiations.
Japanese equities led the charge in global markets after Prime Minister Shigeru Ishiba named a trade negotiator to engage with the United States, following an agreement with Trump. Japanese officials confirmed this development.
Despite the optimism, investors are advised to remain cautious, according to a senior global market strategist at Wells Fargo Investment Institute. There are concerns that key international players are intensifying, rather than easing, tensions.
China, in response to Trump’s threats to increase tariffs, declared its intent to fight back, hinting at aggressive countermeasures.
White House Press Secretary reaffirmed the plan to impose even more stringent tariffs on China by midnight, suggesting a 104% tax on imports. This will coincide with Trump’s latest broad tariff measures, set to begin at 12:01 a.m. Trump has indicated there will be no exceptions or exclusions from these tariffs, according to the nation’s lead trade negotiator.
Representatives from 50 different countries have reached out with potential solutions to balance trade and reduce the U.S. deficit, according to testimony from the U.S. trade representative.
Trump’s trade policies challenge the global economic framework that has historically facilitated lower prices but also led to job displacement in manufacturing. His goal is to shrink the trade deficit, which represents the volume by which U.S. imports exceed exports.
On the market front, companies with extensive global supply chains faced significant pressure. Ralph Lauren, which sourced 15% of its products from China in the last year, saw its shares fall by 5.6%. Meanwhile, Best Buy, whose vendor imports from China contribute to 55% of its products, saw an 8.3% decrease in stock value.
On a more positive note, health insurers emerged as winners for the day. The Centers for Medicare & Medicaid Services announced higher-than-anticipated increases in Medicare Advantage payments, prompting Humana to rise 10.7% and United Health to gain 5.4%.
Overall, the S&P 500 declined by 79.48 points to settle at 4,982.77. The Dow Jones Industrial Average fell 320.01 points to 37,645.59, with the Nasdaq composite dropping 335.35 points to 15,267.91.
In the bond market, longer-term Treasury yields saw a rise for the second consecutive day, recovering more of the losses from preceding months. The 10-year Treasury yield increased to 4.27% from Monday’s 4.15% and Friday’s 4.01%. Typically, yields rise alongside expectations of economic strength and inflation in the U.S.