Wall Street falls again but a rebound in technology stocks helps tamp down the losses
Stocks racked up more losses on Wall Street Tuesday as a trade war between the U.S. and its key trading partners escalated, although a bounce back in technology stocks eased some of the pain.
The Trump administration imposed tariffs on imports from Canada and Mexico starting Tuesday and doubled tariffs against imports from China. All three countries announced retaliatory actions, sparking worries about a slowdown in the global economy.
After sliding as much as 2% in the early going, the S&P 500 was down 0.1% in afternoon trading, with about 66% of the stocks in the benchmark index losing ground. At its lowest point of the day, the index had lost all of its gains following Election Day.
The Dow Jones Industrial Average, which earlier had been off by more than 840 points, was down 223 points, or 0.5%, as of 3 p.m. Eastern time.
The Nasdaq composite reversed an earlier drop and was 0.9% higher. The tech-heavy index briefly reached a 10% decline from its most recent closing high, which is what the market considers a correction, before paring its losses. Technology stocks have had a rough start to the year after leading the market higher in 2024, but gains for Nvidia, Microsoft and other tech heavyweights blunted some of the tariff-related selling elsewhere.
Markets in Europe fell sharply, with Germany's DAX falling 3.5% as automakers saw sharp losses. Stocks in Asia saw more modest declines.
The recent decline in U.S. stocks has nearly wiped out all of the markets’ gains since President Donald Trump’s election in November. That rally had been built largely on hopes for policies that would strengthen the U.S. economy and businesses. Worries about tariffs raising consumer prices and reigniting inflation have been weighing on both the economy and Wall Street.
The tariffs are prompting warnings from retailers, including Target and Best Buy, as they report their latest financial results. Target fell 2.4% despite beating Wall Street’s earnings forecasts, saying there will be “meaningful pressure” on its profits to start the year because of tariffs and other costs.
Best Buy plunged 12.1% for the biggest drop among S&P 500 stocks after giving investors a weaker-than-expected earnings forecast and warning about tariff impacts.
“International trade is critically important to our business and industry,” said Best Buy CEO Corie Barry.
Barry said China and Mexico are the top two sources for products that Best Buy sells, and it also expects vendors to pass along tariff costs, which would make price increases for American consumers likely.
Imports from Canada and Mexico are now to be taxed at 25%, with Canadian energy products subject to 10% import duties. The 10% tariff that Trump placed on Chinese imports in February was doubled to 20%.
Retaliations were swift.
China responded to new U.S. tariffs by announcing it will impose additional tariffs of up to 15% on imports of key U.S. farm products, including chicken, pork, soy and beef, and expanded controls on doing business with key U.S. companies. Canada plans on slapping tariffs on more than $100 billion of American goods over the course of 21 days. Mexico also plans tariffs on goods imported from the U.S.
Companies in the S&P 500 are wrapping up the latest round of quarterly financial reports. They've posted broad earnings growth of 18% for the fourth quarter. But Wall Street has already trimmed expectations for the current quarter to about 7% growth from just over forecasts of 11% at the beginning of the year.
Concerns about profits follow a series of economic reports with worrisome signals that include U.S. households becoming more pessimistic about inflation and pulling back on spending. Consumer spending has essentially driven U.S. economic growth in the face of high interest rates.
Wall Street has been hoping that the Federal Reserve would continue lowering interest rates in 2025. The central bank has signaled more caution, though, partly because of uncertainty surrounding the economic impact of tariffs. The Fed is expected to hold rates steady at its upcoming meeting later in March.
The Fed raised interest rates to their highest level in two decades in order to tame inflation. It started cutting its benchmark rate in 2024 as the rate of inflation moved closer to its target of 2%. But inflation remains stubbornly just above that target and tariffs threaten price increases that could fuel inflation.
In the bond market, Treasury yields were mixed. The yield on the 10-year Treasury rose to 4.21% from 4.16% late Monday. It’s still down sharply from last month, when it was approaching 4.80%, as worries have grown about where the strength of the U.S. economy.
“Because tariffs are in effect, and there’s no guarantee that they’re likely to be temporary, that’s filtering its way to the bond market and we’re seeing the threat of higher inflation eroding the value of the 10-year note,” said Sam Stovall, chief investment strategist at CFRA.
The yield on the 2-year Treasury held steady at 3.94%.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
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