US Markets Crash: Dow tanks 1,300 points in two sessions, S&P 500 gives up election gains on tariff wars
Another down day for benchmark indices on Wall Street as Donald Trump’s tariff wars turned ugly. The Dow Jones shed another 650 points on Tuesday, taking the two-day drop to 1,300 points. The S&P 500 has now given up all the post-Trump election victory gains with another 1.3% drop on Tuesday. The Nasdaq though was an outperformer by not falling as much, ending with losses of 0.4%.
At their respective day’s lows, the Dow Jones was down nearly 850 points, the Nasdaq briefly flirted with plunging into correction territory, meaning a 10% drop from the top and the S&P 500 too was down 2%. Four out of five S&P 500 stocks ended lower.
Tariffs imposed by US President Donald Trump took shape on Tuesday but countries immediately answered with retaliatory tariffs. China imposed additional tariffs of up to 15% on some US products, while Mexican President Claudia Sheinbaum said that they will respond with counter measures over the weekend. The tariff war between the US and Canada took an ugly turn when the White House warned of even more tariffs on Canada after the latter responded with a 25% levy on US goods.
However, there appears to be some consideration of a compromise with financial markets being rattled over the last two sessions. US Commerce Secretary Howard Lutnick suggested some tariff relief in the offing.
The Trump administration could announce a pathway for tariff relief on Mexican and Canadian goods covered by North America’s free trade agreement as soon as Wednesday, Lutnick said. He added that the tariffs would likely land “somewhere in the middle” with Trump “moving with the Canadians and Mexicans, but not all the way.”
If Wall Street learned one thing during Trump’s first term as president, it’s that the stock market is a way he keeps score. The theory was that the president’s penchant for using equities as a report card meant any policy that rattled markets would cause him to revise the plans. But with stocks tanking, investment pros started to question if there’s a “Trump Put” after all.
“Where’s the Trump Put?” said Tom Essaye at The Sevens Report. “At what level of stock market ‘pain’ would Trump and the administration reverse course? Obviously, we don’t know the exact number, but if we look back at Trade War 1.0, history implies the ‘Trump Put’ would be elected around a 10% decline in the S&P 500.”
To Nancy Tengler at Laffer Tengler Investments, while it’s “always excruciating” to be in the middle of a market correction — this is essentially what she think is currently happening. The S&P 500 has now dropped about 6% from its record high.
“This time, of course, it’s spurred by the tariffs,” she noted. “And I think we have to analyze not just what the tariffs will be, but how long we think they’re going to last. If it is short lived, this is just an opportunity to buy stocks for the long term.”
“On a short-term basis, while we wait for the markets to bottom, the next leg lower could prove sinister,” said Dan Wantrobski at Janney Montgomery Scott. “So folks should remain on guard for some big moves in our opinion.”
He noted that while the “buy side” has done a good deal of paring down their technology exposures, they remain overweight US equities in general – which comes alongside some of the heaviest positioning seen on the retail side in years.
“This again presents a good deal of potential firepower in the event that selling pressure gains more momentum from here,” Wantrobski added. “We have not seen any signs of panic yet, and selling has been rather orderly.”
With S&P 500 within a striking distance of its 200-day moving average, Jonathan Krinsky at BTIG says he’s been receiving an increasing amount of questions as to whether we are near a bottom.
“The question we have isn’t whether or not we bounce at the 200-DMA, it’s what happens after the bounce?” Krinsky said. “Investors have become accustomed to ‘V-shaped’ recoveries. While we aren’t opposed to that outcome, we do want to at least be open to the possibility that we see more of a ‘w-shaped’ bottom with a bounce and re-test later this month.”
(With Inputs From Agencies.)