US President Donald Trump’s latest tariff threats had the stock markets tumbling on Friday, with the S&P sinking 2.7 per cent in its worst sell-off since April.
The Dow Jones Industrial Average dropped 878 points, or 1.9 per cent, and the Nasdaq composite fell 3.6 per cent.
The crash came right as the stocks were heading for a slight gain on the last day of trading before the weekend. Trump took to his social media platform to announce he’s considering cranking tariffs on Chinese imports, ending months-long calm on Wall Street.
The “massive increase of tariffs” on Chinese imports comes as a result of Trump’s annoyance with China for placing restrictions on the exports of its rare earth elements, materials that are extremely crucial for manufacturing of electronics, electric vehicles, smartphones, jet engines and wind turbines.
“We have been contacted by other Countries who are extremely angry at this great Trade hostility, which came out of nowhere,” Trump wrote on Truth Social. He also said “now there seems to be no reason” to meet with China’s leader, Xi Jinping, after earlier agreeing to do so as part of an upcoming trip to South Korea.
As tensions between the world’s two largest economies sky-rocketed, roughly six out of every seven stocks at the Wall Street within the S&P 500 started falling. From Big Tech companies like Nvidia and Apple to stocks of smaller entities – trade uncertainties had everything weakening.
Analysts the market was readying for a slide with the US stocks already facing criticism that their prices had shot too high following the S&P 500’s nearly relentless 35 per cent run from a low in April. The index, which dictates the movements for many 401(k) accounts, is still near its all-time high set earlier in the week.
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Worries are particularly high about companies in the artificial-intelligence industry, where pessimists see echoes of the 2000 dot-com bubble that imploded. For stocks to look less expensive, either their prices need to fall, or companies’ profits need to rise. Critics say the market looks too expensive after prices rose much faster than corporate profits.
Levi Strauss dropped 12.6 per cent for one of the market’s larger losses, even though it reported a stronger profit for the latest quarter than analysts expected.
Its forecast for profit over the full year was also within range of Wall Street’s estimates, but the jeans and clothing company could simply be facing the challenge of heightened expectations after a big run. Its stock price came into the day with a surge of nearly 42 per cent for the year so far.
Overall, the S&P 500 fell 182.60 points to 6,552.51. The Dow Jones Industrial Average dropped 878.82 to 45,479.60, and the Nasdaq composite sank 820.20 to 22,204.43.
Some of Friday’s strongest action was in the oil market, where the price of a barrel of benchmark US crude sank 4.2 per cent to $58.90 as a ceasefire between Israel and Hamas came into effect in Gaza. An end to the war could remove worries about disruptions to oil supplies, which had kept crude’s price higher than usual.
Brent crude, the international standard, dropped 3.8 per cent to $62.73 per barrel.
In the bond market, the yield on the 10-year Treasury sank to 4.05 per cent from 4.14 per cent late Thursday. It had already been lower before Trump made his threats, as a report from the University of Michigan suggested that sentiment among US consumers remains in the doldrums.
“Pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers’ minds,” said Joanne Hsu, director of the Surveys of Consumers, adding that “at this time, consumers do not expect meaningful improvement in these factors.”
The job market has slowed so much that the Federal Reserve cut its main interest rate last month for the first time this year, with Fed officials hinting at more cuts through next year to give the economy additional breathing room.
But Chair Jerome Powell has also said they may change course if inflation stays high since lower interest rates can push inflation even higher.
One potentially encouraging signal from the University of Michigan’s preliminary survey said consumers’ expectations for inflation in the coming year edged down to 4.6 per cent from 4.7 per cent the month before. While that’s still high, the direction of change could help the Fed and limit upward pressure on inflation.
In stock markets abroad, indexes fell across much of Europe and Asia as well, with Hong Kong’s Hang Seng falling 1.7 per cent, and France’s CAC 40 dropping 1.5 per cent for two of the bigger moves. But South Korea’s Kospi leaped 1.7 per cent after trading reopened following a holiday.
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