The S&P 500 experienced a 2% decline following U.S. President Donald Trump’s announcement of potentially increasing tariffs on Chinese imports, disrupting the calm that had prevailed on Wall Street for months. This development marks one of the most significant losses for Wall Street since April.
The Dow Jones Industrial Average plummeted by 622 points, while the Nasdaq composite dropped by 2.7%. Initially on track for a modest gain, stocks took a downturn as Trump hinted at escalating tariffs on Chinese goods due to his dissatisfaction with China’s restrictions on rare earth exports crucial for various industries.
In a statement on Truth Social, Trump expressed receiving backlash from other countries over the trade tensions. He also indicated reconsidering a meeting with China’s leader, Xi Jinping, which was previously arranged as part of an upcoming trip to South Korea.
The escalating trade tensions between the world’s top economies led to a broad decline on Wall Street, with about 80% of S&P 500 stocks registering losses. The market saw a sell-off across various sectors, including prominent tech companies like Nvidia and Apple, as well as smaller firms grappling with uncertainty surrounding tariffs and trade issues.
Critics had already raised concerns about overvalued U.S. stocks, following a sharp 35% rally from April lows that propelled the S&P 500 to record levels. The market’s steep ascent, outpacing corporate earnings growth, led to worries about inflated prices, particularly in the artificial intelligence sector drawing comparisons to the dot-com bubble of 2000.
Levi Strauss experienced a significant decline of 11.4%, despite reporting better-than-expected profits for the latest quarter. The company’s full-year profit forecast, although in line with Wall Street estimates, faced challenges possibly due to heightened market expectations following its stock’s impressive 42% surge year-to-date.
In the oil market, a barrel of benchmark U.S. crude dropped by 4.1% to $58.99 US, with a ceasefire in Gaza between Israel and Hamas contributing to hopes for reduced Middle East tensions and stable oil supplies. Brent crude also fell by 3.9% to $62.66 per barrel. Concurrently, the yield on the 10-year Treasury decreased to 4.07% from 4.14% amid persisting consumer sentiment concerns.
The University of Michigan’s consumer sentiment report highlighted ongoing worries among U.S. consumers relating to high prices and waning job prospects, prompting the Federal Reserve to cut interest rates to support the economy. However, Fed Chair Jerome Powell cautioned that sustained high inflation might necessitate a policy shift despite multiple rate cuts planned through next year.
The University of Michigan’s preliminary survey indicated a slight decrease in consumers’ inflation expectations for the upcoming year, offering a potential respite in curbing inflationary pressures. Overseas, stock indexes in Europe and Asia experienced declines, with notable movements seen in Hong Kong’s Hang Seng and Japan’s Nikkei 225, while South Korea’s Kospi surged following a holiday hiatus.