The tranquility that had enveloped Wall Street for months was abruptly shattered on Friday as U.S. stocks experienced a significant downturn. This dramatic shift was triggered by President Donald Trump’s announcement that he is considering a substantial increase in tariffs on Chinese imports. The S&P 500 plummeted by 2.7%, marking its worst performance since April. Similarly, the Dow Jones Industrial Average dropped by 878 points, or 1.9%, and the Nasdaq composite fell by 3.6%. The market had initially been on a path to modest gains in the morning, but Trump’s social media post on Truth Social, where he expressed his discontent with China’s restrictions on rare earth exports, sent shockwaves through the financial world. Rare earths are crucial for manufacturing a wide range of products, from consumer electronics to jet engines. Trump’s post also indicated that a planned meeting with Chinese President Xi Jinping during an upcoming trip to South Korea might no longer be necessary. The escalation in tensions between the two largest global economies led to widespread declines across Wall Street, with nearly six out of every seven stocks in the S&P 500 falling. The downturn affected a broad spectrum of companies, from tech giants like Nvidia and Apple to smaller firms grappling with the uncertainty surrounding tariffs and trade. The market’s vulnerability to a downturn was already a topic of discussion, as the S&P 500 had experienced a nearly relentless 35% rise from its low in April, leading some critics to argue that stock prices had become excessively high. Concerns were particularly pronounced in the artificial intelligence sector, where some saw parallels to the dot-com bubble of 2000. For stock prices to appear more reasonable, either a decline in prices or an increase in corporate profits would be necessary. Levi Strauss, for instance, saw its stock price drop by 12.6% despite reporting stronger-than-expected quarterly profits. The company’s full-year profit forecast was within Wall Street’s estimates, but it faced the challenge of heightened expectations following a significant surge in its stock price earlier in the year. The S&P 500 closed at 6,552.51, down by 182.60 points, while the Dow Jones Industrial Average ended at 45,479.60, a drop of 878.82 points. The Nasdaq composite finished at 22,204.43, down by 820.20 points. The oil market also saw significant movement, with the price of benchmark U.S. crude falling by 4.2% to $58.90 per barrel. This decline was partly attributed to a ceasefire between Israel and Hamas in Gaza, which alleviated concerns about potential disruptions to oil supplies. Brent crude, the international standard, dropped by 3.8% to $62.73 per barrel. In the bond market, the yield on the 10-year Treasury fell to 4.05% from 4.14% the previous day. This decline was influenced by a report from the University of Michigan indicating that consumer sentiment remains subdued, with concerns about high prices and weakening job prospects at the forefront. The Federal Reserve had recently cut its main interest rate for the first time this year, with further cuts anticipated to provide the economy with additional support. However, Fed Chair Jerome Powell has cautioned that the central bank may adjust its course if inflation remains high. A preliminary survey from the University of Michigan offered a glimmer of hope, showing that consumers’ expectations for inflation in the coming year had slightly decreased to 4.6% from 4.7% the previous month. While still elevated, this downward trend could help the Fed manage inflationary pressures. Internationally, stock markets in Europe and Asia also experienced declines, with Hong Kong’s Hang Seng falling by 1.7% and France’s CAC 40 dropping by 1.5%. However, South Korea’s Kospi surged by 1.7% following the reopening of trading after a holiday.
Wall Street tumbles to its worst day since April after Trump threatens more tariffs on China
