As U.S. President Trump escalated the trade war again, the sell-off in Wall Street stocks intensified, and the U.S. stock market once fell below its recent high by 10%. The market reacted strongly to this, and investor sentiment was severely affected. This has led to increased volatility and uncertainty in the market.
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03-12, 2025Trump announced that he would impose additional tariffs on steel and aluminum from Canada, doubling his planned increase to 50%. Upon the news, the S&P 500 fell 1.4% in afternoon trading. Trump claimed that this move was a response to actions taken by a Canadian province, after previously threatening to impose tariffs on one of America's most important trading partners. These tariffs could significantly impact trade relations between the two countries.
The Dow Jones Industrial Average fell 678 points, a drop of 1.6%, and the Nasdaq Composite fell 1%. The S&P 500 is on the verge of what Wall Street calls a "correction," a 10% drop, and is only 0.1 percentage points away from that warning line. Market volatility is high, and investors are facing tremendous pressure. This situation requires investors to remain vigilant and adaptable.
In the past eight days, the S&P 500 has had single-day gains or losses of more than 1% at least seven times, reflecting Wall Street's uncertainty about how much economic pain the Trump administration is willing to endure through tariffs and other policies to reshape the U.S. and world economies. In announcing the further escalation of the trade war, Trump said, "The only thing that makes sense is that Canada becomes our treasured 51st state. That would make all tariffs and everything else go away completely." This statement highlights the administration's approach to trade negotiations.
The Trump administration's on-again, off-again introduction of tariff policies has brought confusion and pessimism to American families and businesses, with more economic warning signs following. Tariffs directly harm the economy by raising prices for American consumers and hindering global trade. Even if the ultimate impact of the tariffs is more moderate than expected, all of this dramatic volatility itself could create enough uncertainty to cause American businesses and consumers to fall into economic stagnation. This uncertainty can significantly impact investment and spending decisions.
Delta Air Lines said late Monday that it has seen a change in customer confidence, affecting near-term booking demand for flights. This prompted the company to roughly halve its revenue growth forecast for the first quarter of 2025, from a range of 7% to 9% to a range of 3% to 4%. As a result, Delta Air Lines' stock price fell 8.3%. This indicates a potential slowdown in the travel industry.
Southwest Airlines also lowered its forecast for an important underlying revenue trend, specifically citing reduced government travel, as well as wildfires in California and "weakness in booking and demand trends as the macro environment has deteriorated." However, its stock price rose 8.5% after the airline said it would soon begin charging baggage fees to some passengers and announced measures to encourage its most loyal customers. This highlights the complex factors influencing airline stock performance.
Technology giant Oracle reported lower-than-expected quarterly profits and revenue, sending its stock down 5%. However, some large technology stocks stabilized after suffering heavy losses in recent months, helping to control the market's decline. For example, Elon Musk's Tesla stock rose 1.6% after Trump said he would buy a Tesla to show support for "Elon's kid." This shows how individual company performance can be influenced by external factors.
Tesla's sales and brand have been under pressure as Musk has been leading efforts in Washington to cut federal government spending. Tesla's stock price has fallen 44.1% so far this year. Other large technology giants, which have led the market to new highs in recent years, have also performed more strongly. Nvidia rose 1.3%, narrowing its year-to-date decline to 19.3%. The company has been struggling as the market sell-off has particularly hit Wall Street stocks that were considered too expensive in the artificial intelligence technology boom. The market's reaction reflects concerns about valuation and future growth potential.
A handful of large technology companies were the main reason the S&P 500 hit a record high on February 19. Last year, just seven companies contributed more than half of the S&P 500's total return: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. These companies have had a significant impact on the overall market performance.
Citigroup strategists said they "doubt whether the AI bubble has completely burst," and that these companies could lead U.S. stocks back to their multiyear outperformance of global markets. But strategists wrote in a report, "That is a long-term thing, not a matter of the next few months," and said "U.S. exceptionalism is at least pausing." This suggests a potential shift in market leadership and global economic dynamics.
So far this year, foreign stock markets have mostly outperformed the U.S., with stock indexes in Europe and most of Asia falling. China's National People's Congress concluded its annual meeting and took some measures to help boost the slowing economy, with the Shanghai stock market rising 0.4% and the Hong Kong stock market showing little change. These developments highlight the varying economic conditions and policy responses across different regions.
In the bond market, Treasury yields, which have fallen sharply in recent months due to concerns about the U.S. economy, have stabilized. The 10-year Treasury yield rose from 4.22% late Monday to 4.23%. In January, that figure was closer to 4.8%. This indicates a potential shift in investor sentiment regarding the U.S. economic outlook.
A report released Tuesday morning showed that U.S. employers posted 7.7 million job openings at the end of January, exactly in line with economists' expectations. This is the latest signal that the U.S. job market overall remains relatively solid, at least for now, after the U.S. economy ended last year at a healthy pace. The strong job market provides a positive sign for the overall economy.
