Wall Street’s main indexes fell on Tuesday, with the tech-heavy Nasdaq on track to confirm a correction as investors feared an escalating trade war between the U.S. and its partners could harm the economy. The Nasdaq Composite index was nearing correction territory, having dropped 10% from its record closing high on December 16. Financials weighed heavily on the three major indexes, with the S&P 500 financial sector leading declines with a 3.6% drop. Major banks like Citigroup and JPMorgan Chase & Co fell 7.4% and 4.8%, respectively, pushing the bigger banks index down by 5.5%. The CBOE market volatility index hit a two-month high, adding 1.99 points.
The downturn followed the U.S.’s imposition of tariffs on imports from Mexico and Canada, along with doubled duties on Chinese goods. In response, Beijing and Canada announced retaliatory tariffs on U.S. imports. This standoff could disrupt nearly $2.2 trillion in annual trade. “The fear here is that it’s going to slow (economic) growth,” said Adam Sarhan, CEO of 50 Park Investments.
At 11:47 a.m. ET, the Dow Jones Industrial Average fell 698.44 points, or 1.62%, the S&P 500 lost 88.03 points, or 1.50%, and the Nasdaq Composite dropped 210.73 points, or 1.15%. Companies with extensive North American supply chains, such as Ford and General Motors, fell 3% and 3.6%, respectively. Housing stocks touched a one-year low.
Investors anticipate that tariffs will increase inflation, dampen demand, and cut into corporate profits. The Russell 2000 index fell 2%. Traders increased bets on interest rate cuts, expecting the Federal Reserve to lower borrowing costs by at least three 25 basis points by December. New York Fed President John Williams’ upcoming comments will be scrutinized for insights into monetary policy.
U.S. shares of bullion miners like Harmony Gold Mining rose 3.7% as markets turned to safe-haven assets. Target shares dropped 5.8% after forecasting full-year sales below estimates. Best Buy fell 15.3% after issuing a downbeat forecast, while Walgreens jumped 6.6% amid reports of a potential buyout deal. Declining issues outnumbered advancers by a 4.66-to-1 ratio on the NYSE and by a 3.27-to-1 ratio on the Nasdaq.
— news from Reuters