The recent escalation of the U.S. trade war with Canada, Mexico, and China has had a significant impact on the stock market, leading to notable losses across major indexes. The S&P 500 saw a 1.2% drop, the Dow Jones Industrial Average fell by 1.6%, and the Nasdaq, though less affected, still dipped 0.4%. The Nasdaq briefly entered correction territory, a 10% decline from its recent high, but gains from tech giants like Nvidia and Microsoft helped mitigate these losses.
Financial stocks were particularly hard hit, with JPMorgan Chase and Bank of America experiencing declines of 4% and 6.3%, respectively. European markets, especially Germany’s DAX, also saw sharp falls, with automakers bearing the brunt. Asian markets, while affected, experienced more modest declines. Analysts highlighted the severity of the trade war, exceeding expectations and causing market uncertainty.
The trade war has erased all stock market gains since Trump’s election, as initial hopes for economic-boosting policies faded. Retailers like Target and Best Buy are feeling the pressure, with Target’s stock falling despite positive earnings, and Best Buy experiencing a significant drop due to weak forecasts and tariff concerns. The U.S. imposed 25% tariffs on Canada and Mexico, with additional taxes on Canadian energy, and doubled tariffs on Chinese goods to 20%. In retaliation, China, Canada, and Mexico announced their own tariffs on U.S. products.
Despite strong earnings growth of 18% in the last quarter, Wall Street now expects a lower 7% growth for the current quarter. Concerns about profits are rising, with consumers showing increased pessimism about inflation and reducing spending. The Federal Reserve, cautious due to tariff uncertainties, is expected to hold interest rates steady, despite earlier hopes for cuts.
In the bond market, Treasury yields were mixed, with the 10-year yield rising slightly but remaining lower than last month, reflecting economic growth concerns. The 2-year yield remained unchanged. Overall, the indexes ended with notable drops, underscoring the economic challenges posed by the ongoing trade disputes.
