By David French
On Thursday, key indicators on Wall Street experienced significant declines, recording their biggest one-day drops in several years. This downturn was triggered by President Donald Trump’s imposition of extensive tariffs, which sparked concerns about a potential full-scale trade war and a worldwide economic slowdown.
A combined $2.4 trillion in stock market value was wiped off of S&P 500 companies, as the benchmark suffered its largest one-day percentage decline since June 2020.
The Dow Jones Industrial Average hasn’t experienced such a severe single-day drop since June 2020, whereas the Nasdaq Composite saw its biggest daily percentage decrease since the market turmoil triggered by the coronavirus pandemic began in March 2020.
The catalyst for this potential turmoil was Trump's imposition of a 10% tariff on the majority of U.S. imports along with significantly increased duties on numerous other nations, posing a risk of triggering widespread economic disruption globally.
Investors adjusted their holdings to align with the emerging economic landscape, worrying about how other nations might respond to Trump's statements coming out of the White House.
China pledged to respond with countermeasures, as did the European Union, which will face a 20% tariff. South Korea, Mexico, India, and various other trade partners stated they would wait momentarily as they attempt to secure concessions prior to the scheduled tariffs taking effect on April 9.
Significant fluctuations are anticipated over the next few days: the CBOE Volatility Index, often referred to as Wall Street’s fear meter, finished above 30 points for the first time since August.
"Out here, we have many more questions than answers," remarked Steven DeSanctis, who serves as the small and mid-cap strategist at Jefferies Financial Group.
The S&P 500 declined by 274.45 points, equivalent to a drop of 4.84%, ending at 5,396.52 points. Meanwhile, the Nasdaq Composite shed 1,050.44 points, representing a decrease of 5.97% to reach 16,550.61. Additionally, the Dow Jones Industrial Average went down by 1,679.39 points, marking a fall of 3.98%, closing at 40,545.93.
The tariff-induced market plunge on Wall Street sharply contrasted with the early enthusiasm following Trump’s re-election in November. At that time, expectations of pro-business policies had driven U.S. stock prices to all-time peaks.
Tech stocks known for their impressive gains, which have driven market indices to all-time peaks recently, took a significant hit on Thursday.
Apple shares plummeted by 9.2%, marking their poorest single-day performance in half a decade, largely due to a cumulative 54% tariff imposed on goods coming from China, which is crucial for most of Apple’s production. Nvidia saw a decline of 7.8%, while Amazon.com fell by 9%.
Traders are increasing their anticipation for the Federal Reserve to decrease interest rates.
"The Federal Reserve has substantial resources to assist the markets," stated George Bory, who leads investments strategy for fixed income at Allspring Global Investments.
The market is currently anticipating additional interest rate reductions, possibly occurring earlier than expected," which suggests that a loosening in June appears certain, along with potential cuts coming in May too.
This increases the importance of Friday’s employment report and Federal Reserve Chairman Jerome Powell's address that day, potentially providing key perspectives on the condition of the U.S. economy and the prospective trajectory of interest rates.
Retailers suffered significant losses, with shares of Nike dropping 14.4% and Ralph Lauren plummeting 16.3%, following a series of new tariffs imposed on key manufacturing centers such as Vietnam, Indonesia, and China.
Large financial institutions, known for their sensitivity to economic fluctuations, experienced declines. Shares of Citigroup, Bank of America, and JPMorgan Chase & Co all decreased within the range of 7% to 12.1%.
The U.S. small-cap Russell 2000 index plummeted by 6.6%, marking its largest single-day decline since the start of the pandemic, which highlights worries regarding the well-being of the local economy.
Jefferies' DeSanctis stated, "Smaller companies often act as vendors to larger corporations; therefore, when big-name firms face difficulties due to tariffs, this will exert significant pressure on these smaller supplier firms."
The energy sector dropped 7.5%, making it the biggest loser across the 11 S&P industry groups, as oil prices fell 6.8% due to the tariff concerns and OPEC+ accelerating production increases.
The only segment showing green was consumer staples, which rose by 0.7%. Often seen as a safe bet, this area received an additional boost from Lamb Weston, whose stock surged by 10% following their earnings report release.
The volume on U.S. exchanges reached 20.90 billion shares, as opposed to the 16.13 billion share average observed over the entire session for the past 20 trading days.
(Sruthi Shankar and Pranav Kashyap reported from Bengaluru, with David French contributing from New York; additional reporting by Nupur Anand; edited by Saumyadeb Chakrabarty, Anil D'Silva, Shounak Dasgupta, and Richard Chang)