On Tuesday, the three major US stock indexes experienced a sharp decline after President Donald Trump reiterated his threat to impose new, substantial tariffs on Canada. However, by the afternoon, markets began to recover slightly after both US and Canadian officials announced they would meet later this week to deescalate tensions and renegotiate trade policies.
- The Dow Jones Industrial Average closed down by 478 points, or 1.14%, after earlier tumbling more than 700 points.
- The S&P 500 dropped 0.76%, while the Nasdaq Composite fell 0.18%.
The S&P 500 flirted with correction territory, closing 9.3% below its record high from February, while the Nasdaq, already in correction, finished 13.6% below its peak from December.
Despite the market downturn, President Trump expressed no immediate concern.
“Markets go up and down, but we need to focus on rebuilding our country,” he said during a White House briefing.”The market is weary of the ongoing uncertainty and flip-flopping on trade policy,” said Art Hogan, Chief Market Strategist at B. Riley Wealth Management, explained. He added, “With so much uncertainty, investors lack the confidence to make decisions.”
Volatility Continues as Markets React to Tariff Threats
Wall Street’s fear gauge, the Cboe Volatility Index (VIX), initially spiked but then receded on Tuesday. On Monday, the VIX surged 19%, reaching its highest level since December, signaling heightened market uncertainty.
The steep declines in the major indexes continued a broader market rout that has caused concern across Wall Street. Traders and analysts are now asking when the volatility will subside.
Trump has previously downplayed the significance of market fluctuations, with Commerce Secretary Howard Lutnick commenting that minor stock market dips “do not determine the success of our policies.”
Ross Mayfield, Investment Strategist at Baird, noted that “there’s a level of pain tolerance that investors hadn’t fully accounted for.”
White House Defends Economic Agenda Amid Market Turmoil
In a Tuesday briefing, White House Press Secretary Karoline Leavitt defended the administration’s economic strategy, reiterating that the US is undergoing a necessary “period of economic transition.” She assured the public that the president remains committed to revitalizing American manufacturing and restoring economic strength, noting that Trump had the opportunity to serve the interests of both Wall Street and Main Street during his first term.
The volatility follows a dramatic sell-off on Monday, when the Dow lost 890 points and the S&P 500 plummeted 2.7%. Trump had also raised concerns about a possible recession in a Fox News interview on Sunday, which added to investor anxiety. On Tuesday, he dismissed fears of a recession, saying the market’s decline didn’t concern him.
Stocks Hit Hardest: Airlines and Ford Lead the Drop
Among the biggest losers on Monday were major airline stocks. Delta Airlines (DAL) dropped 7.25% after slashing its earnings forecast for the year. American Airlines (AAL) lost 8.3%, and United Airlines (UAL) fell 2%.
Ford Motor Company (F) also saw a decline, dropping 2.7% on Tuesday as market anxieties continued to weigh on stock performance.
Global Markets Impacted by US Tariff Concerns
The ripple effects of US trade policy concerns also reached global markets. European stocks saw widespread declines, with the STOXX Europe 600 index falling 1.7%. The DAX in Germany and the CAC in France each dropped 1.3%, while the FTSE 100 in London slid 1.2%.
Investor Sentiment Remains Cautious Amid Trade Policy Uncertainty
The mood on Wall Street remains cautious, with many investors feeling nervous about the administration’s unpredictable tariff announcements. As per CNN’s Fear and Greed Index, market sentiment has been overwhelmingly driven by “extreme fear” over the past two weeks.
The ongoing uncertainty surrounding US trade policy continues to drive volatility, leaving investors grappling with the potential risks of more aggressive tariffs and their impact on both domestic and global markets.
