The American stock market plummeted Thursday, with the tech-heavy Nasdaq Composite losing 2.6% and officially in correction mode—down 10% or more from recent highs. The S&P 500 lost 1.8% and the Dow Jones Industrial Average declined 1%, continuing a wild trading stretch that kicked off in late January.
Thursday's fall came even as the Trump administration announced a partial delay in implementing tariffs on Canadian and Mexican products that meet the US-Mexico-Canada Agreement until April 2. This follows previous market volatility when the administration first levied 25% tariffs on Canada and Mexico in January. Followed by doubling the tax on Chinese imports to 20%.
The market is struggling with uncertainty at this stage. Investors historically react negatively to uncertainty. The constant policy reversals are building up this uncertainty.
The recent market downturn is the result of incremental tension build up. Starting from January, when President Donald Trump first made his plan to impose tariffs officially in public. On January 29, the S&P 500 lost 0.8% while the Dow fell 122 points after falling much more dramatically at first. Investors got temporary relief then when Mexico and Canada obtained one-month reprieves through negotiations.
Fast-forward to March, the initial relief has converted into fresh fears. The S&P 500 and Nasdaq have lost all gains made since the presidential election in November. The current market is a stark contrast to the optimism prevailing earlier this year.
The market at first appeared to take Trump's tariff talks as merely a negotiating ploy. But now that these policies are actually being put into effect and nations are responding with retaliation. Investors are now factoring in actual economic repercussions.
Technology company's stocks are the hardest hit during this decline. Thursday Tech stock fall report:
This decline is felt even worse for smaller technology companies, such as Marvell Technologies, whose forecast fell short of expectations and shed almost 20%. Database software vendor MongoDB fell more than 26% on poor guidance.
This trend mirrors January's market response when Nvidia dropped 2.8% in response to broader issues plaguing the artificial intelligence space. The pairing of tariff anxiety with certain sector-specific trouble has fuelled a perfect storm for the tech sector.
The auto sector relies on lower-cost imports. Recent high volatility in markets and tariff policies are shredding this logistically optimized international supply chain.
Automakers saw a decline of 4% in early March. However, the White House on Wednesday announced a delay on tariffs on automobiles and auto parts from Canada and Mexico for one month. Following this announcement:
The ongoing tariff war has made Wall Street worried about re-accelerating inflation and slow economic growth across North America. This is evident from the financial sector, which led the S&P 500 to decline on Tuesday. Bank of America and Citigroup both fell over 6% on the day, while Wells Fargo, JPMorgan Chase, Goldman Sachs, and American Express also plummeted.
These worries are sounding alarm bells in the retail sector. Target had a better-than-expected quarterly profit but is cautious on consumer hesitation. Best Buy stocks fell by 13% on reports that tariffs would result in hiking prices which hurt sales.
Thursday's economic reports created more complexity for the picture. A report from outplacement firm Challenger, Gray & Christmas indicated government job cuts surged layoffs to their highest levels since July 2020.
Treasury yields, which normally decline when economic conditions soften, have demonstrated considerable activity throughout this bout of market instability. The 10-year Treasury yield fell as low as 4.11% on Tuesday morning, its lowest since October, before rising slightly to 4.3% by Thursday.
Other indicators in the market also show the uncertainty. Bitcoin, which reached US$95,000 at the beginning of the week, was at US$89,200 when equity markets closed on Thursday. Prices of oil have been unable to find direction, with West Texas Intermediate closing at US$66.30 a barrel after a lot of volatility.
Gold, the traditional haven in periods of market tension, has remained pretty solid at about US$2,920 an ounce.
Many important factors will shape market direction. The February jobs report tomorrow will be closely monitored for evidence of labour market weakness.
Trump traditionally pays close attention to stock market performance. Market volatility and trade policy developments may spark meaningful market action, depending upon the economic indicators.
The recent decline of the stock market reflects the complicated interdependence among trade policy, economic expansion, and investor mood. Tariffs, though possibly aiding certain domestic sectors with more protection, impose serious costs such as elevated consumer prices, and possible inflation, and upset international business relations.
For investors, surviving in this scenario entails cautious observation of both risk and opportunity introduced by changing trade policy.