US Stock Market Takes a Nosedive as Trump’s Tariff Threats Spook Investors

The US stock market was in free fall on Thursday, and it wasn’t one of those crummy days of some kind – it was a flat-out sell-off that left Wall Street reeling. Already nervous with lingering tensions in global trade, investors were handed another dose of uncertainty when US President Donald Trump escalated his saber rattling regarding tariff tensions. And what did they do? The three key US indexes all went into negative territory.

The S&P 500 fell sharply, down 188.85 points, or a rough 3.46%, to close at 5,268.05. The Nasdaq Composite, weighted with the technology stocks, fell even deeper, down 737.66 points – a tough 4.31% fall – to close at 16,387.31. The Dow Jones Industrial Average also fell, off by 1,014.79 points, or 2.5%, closing at 39,593.66.

So why the change of heart suddenly? All about increasing tariff jitters. On Wednesday, President Trump surprised markets by signing a 90-day temporary tariff suspension – a move that fueled shares for the day, with the S&P 500 recording its biggest single-day gain since the 2008 financial crisis and the Nasdaq recording its second-biggest single-day gain on record. But only temporarily.

By Thursday, that sentiment had fully reversed. Trump doubled down with the threat of placing another round of tariffs on Chinese imports on top of an extremely sensitive trade relationship already. The White House released a statement announcing that a blanket 10% tariff on virtually all US imports would stand and that total tariffs on China now amounted to an eye-popping 145%. Of course, that shocked financial markets.

Tech shares, squarely in the middle of it all, suffered the largest loss. So-called “Magnificent Seven” – AI-momentum champions – were wiped out. Apple shares dropped 4.24%, and Nvidia dropped 5.91%. Tesla dropped hardest, down 7.27%, and Advanced Micro Devices (AMD) dropped too.

The loss did not end at technology, however. Of the 11 S&P 500 sectors, the consumer goods alone were untouched by the red-tide. Energy and tech sectors took the worst beating. There was a whole sea of red out there on Wall Street.

Market breadth was also dismal. On the NYSE, falling stocks outnumbered gainers 4.81-to-1. On Nasdaq, nearly 3,600 stocks fell, compared to 867 advancers, a 4.14-to-1 decliners-to-advancers ratio. It was clear that the market wasn’t simply reacting – it was in panic mode.

One of the few companies that fared better on the negative side was CarMax. The retailer of used cars’ stock plummeted 17% following its awful fourth-quarter results. It was another signal that even outside the universe sensitive to trade and technology, investor sentiment was subdued.

Simultaneously, while the equities plummeted, the US dollar too fell, particularly against the traditional havens. The greenback struck a 10-year low against the Swiss franc by 3.89% at 0.825. The euro rose 2.23%, and the Japanese yen too strengthened as the investors poured into the havens with growing uncertainties.

At the same time, Treasury yields declined as funds flowed into the safe government paper. The yield on the 10-year Treasury note declined by a narrow margin to 4.386%, while the 2-year yield, being the most sensitive to interest rate expectations, declined 11 basis points to 3.843%.

A surprise decline in US inflation numbers added to the suspense during the day. Consumer Price Index (CPI) unexpectedly declined by 0.1% in March, its first decline since May 2020. This was a slowdown from a 0.2% rise in February and showed that inflationary pressures are beginning to ease. CPI rose 2.4% over the previous 12 months, from 2.8% previous month.

Normally, such deflation in inflation would be good news for markets as it would be able to release pressure on the Federal Reserve to raise interest rates. But tariffs having a possible shot at raising prices and developing new price pressures, the figures gave little comfort to investors on Thursday.

So where is the market going from here? That is the question. With trade tensions turned up again and uncertainty cast over economic policy, volatility seems to be the new normal. Investors are obviously on tenterhooks, trying to unravel mixed signals emanating from Washington and find their way through a fast-moving global world.

For now, Thursday’s unexpected selloff is a reminder that despite all the positive news for the economy, policy and geopolitics can still shift mountains. On trade war, Wall Street will be paying attention – and bracing itself for more of the same.