Trump tariff carnage drags Nasdaq near bear territory; Dow falls 4.4%

Second day of market chaos since Trump tariff announcement; Nasdaq drops 20% from all-time closing highs

David French

 

Wall Street slumped for a second straight session on Friday, pushing the Nasdaq toward a bear market, as U.S. President Donald Trump's sweeping tariffs drew responses from global governments, escalating a trade war and stoking recession fears.

 

All three main benchmarks were down by more than 4.5% in mid-afternoon trade, on course for their worst two-day declines since the coronavirus pandemic during Trump's first term.

 

The Nasdaq Composite's slide had it on track to confirm a bear market for the tech-heavy index. The Dow Jones Industrial Average was on course to confirm a correction.

 

Since late on Wednesday, when Trump boosted tariff barriers to their highest level in more than a century, S&P 500 companies have lost over $4 trillion in stock market value. That record two-day decline exceeded a two-day loss of $3.3 trillion in March 2020, according to LSEG data compiled by Reuters.

 

 

Investors have dumped stocks, fearing both the new US economic reality and also how U.S. trading partners might retaliate by steepening their own trade barriers. The CBOE Volatility index, or Wall Street's fear gauge, hit its highest level since August at 42.13 points.

 

China's finance ministry said it would impose additional tariffs of 34% on all U.S. goods from April 10.

 

Markets then dropped further on talks between the prime ministers of Britain, Australia and Italy on how to respond to Trump's tariff salvo.

 

"We're in the Wild West of a trade war right now," said Mariam Adams, managing director at UBS Wealth Management.

 

"Anything can happen, and this kind of uncertainty is torture for global markets."

 

At 02:18 p.m. ET, the Dow Jones Industrial Average fell 1,812.68 points, or 4.48%, to 38,729.54, the S&P 500 slumped 275.80 points, or 5.10%, to 5,121.21 and the Nasdaq Composite lost 833.35 points, or 5.04%, to 15,716.54.

 

Earlier, investment bank JP Morgan said it was forecasting a 60% chance of the global economy entering a recession by year-end, up from 40% previously.

 

Federal Reserve Chair Jerome Powell spoke publicly for the first time since Trump's tariff announcement. Powell highlighted that the unexpectedly hefty tariffs could trigger higher inflation and slower growth, setting the stage for challenging decisions for U.S. central bankers.

 

Traders still anticipated a more accommodative Fed policy, with money market futures pricing in cumulative rate cuts of 100 basis points by the end of 2025, compared with about 75 bps a week earlier.

 

Safe-haven buying in the bond market sent the yield on the benchmark 10-year Treasury notes to touch a six-month low. It rebounded slightly to 3.98% in mid-afternoon trade.

 

This pushed U.S. bank stocks down further, with the sector under pressure globally, as the prospect of interest rate cuts from central banks and a hit to economic growth from tariffs would crimp profitability. The S&P Banks index dropped 6.6%.

 

All 11 S&P sectors were more than 2.8% lower, with energy the leading laggard for the second straight day, off 7.9%, as companies tracked a 7.2% decline in US crude prices.

 

US-listings of Chinese companies dived, with JD.com and Alibaba and Baidu shedding over 9% each.

 

Companies with exposure to China also fell across the board, with mega-caps such as Apple falling 6.4%.

 

The chipmakers index sank 7.3%, compounding the 9.9% decline the previous day. The sector is particularly vulnerable to both China and U.S. tariffs as many chip companies design their chips in the US, but have them manufactured in China, potentially hitting them with a double-whammy of levies.