S&P 500 & Dow Jones Industrial Average both closed lower Tuesday, as tensions in the trade wars increased following US President Donald Trump’s imposition of new tariffs against Canada, Mexico, & China.
Trump’s 25% duty on Mexican and Canadian imports, as well as a doubled duty on Chinese products, went into effect midnight.
China and Canada responded by imposing retaliatory duties, and Mexican President Claudia Sheinbaum promised to do the same, but she didn’t provide any specifics.
Investors’ concerns about potential economic consequences led to a drop in the Dow for a second day.
Blue-chip Index dropped by 670.25 (1.6%) points, continuing Monday’s decline of nearly 650 points.
After its worst day of the year the S&P 500 fell 1.2% while the Nasdaq Composite dropped 0.3%.
The Dow Jones is nearly unchanged for this year after Tuesday’s losses.
The Dow Jones Industrial Average had dropped more than 840 in points at its intraday bottom, while the S&P was also down 2%. And the Nasdaq, which had lost over 2% as well, had briefly flirted with correction territory, defined as a drop of 10% from a previous high.
Some investors, however, sought to take advantage of stocks which have been heavily discounted this year. This includes Nvidia.
Automobiles, consumer products, and retail under pressure
Tariffs were a burden for companies that heavily depended on imports from North America.
- Shares of General Motors (GM) and Ford (F), respectively, fell by more than 4% et 2% as concern over disruptions in the supply chain increased.
- Chipotle, a retailer and consumer products: Chipotle lost 2%. Chipotle sources half its avocados in Mexico. Target (TGT), whose CEO warned that prices for produce could increase in the near future due to tariffs, declined by 3%.
- Small-cap and tech stocks are also down. The Russell 2000 Index (RUT), an index that tracks the smaller U.S. companies, is also lower, a reflection of broader economic concerns.
Walgreens’ (WBA.O), on the other hand, jumped after reports of Sycamore Partners moving closer to a buyout deal.
Elon Musk’s Tesla suffered a 4% decline due to the drop in Chinese sales.
Markets in turmoil
The market participants were hoping for a resolution at the last minute to stop full tariff implementation. However, losses increased on Monday when Trump announced that levies will proceed as scheduled.
Investors are worried about the soft economic data that has been released over recent weeks. Retail and bank stocks led Tuesday’s decline amid concerns of higher tariffs weighing on economic growth.
The S&P 500 is now below the level of the November election day closing price, where Trump won his second term.
The market will pay close attention to the speech he gives to Congress Tuesday evening, in which he’s expected to talk about tariffs — a key component of his strategy for economic growth.
As new information becomes available, this post S&P 500 goes negative in 2025 due to Trump’s Tariffs giving investors jitters could be updated.
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