Risk Appetite Sinks as Tariff Fears Sink In – US Market Wrap

Three days of relative calm on Wall Street were broken, with big tech driving major stock benchmarks lower as fears about the impact of a trade war on the economy and inflation returned to dampen risk appetites.

Following its longest winning streak since January, the S&P 500 fell more than 1%. The slide was led by the “Magnificent Seven” group of megacaps, which is on track for its worst quarter since 2022. Nvidia and Tesla fell at least 5.5%. Microsoft fell after TD Cowen analysts said the software giant had withdrawn from new data centre projects in the United States and Europe. The Nasdaq 100 fell about 2%.

President Donald Trump will announce tariffs on the auto industry on Wednesday, escalating his dispute with trading partners ahead of a larger tariff push next week. Alberto Musalem, President of the Federal Reserve Bank of St. Louis, said it’s unclear whether the impact of tariffs will be temporary and warned that secondary effects may prompt officials to keep interest rates steady for longer.

Worries about the economic effects of the global trade war are sapping liquidity in US stocks, causing a headache for institutional investors and potentially increasing volatility in broader markets.
Liquidity in S&P 500 stock-index futures, as measured by the most active contract, is at a two-year low, according to data from Deutsche Bank.

The S&P 500 index fell 1.1%. The Nasdaq 100 declined 1.8%. The Dow Jones Industrial Average fell 0.3%. An index of megacaps fell 3%. The Russell 2000 fell 1%.
The yield on 10-year Treasuries rose three basis points to 4.35%. The dollar rose 0.3%.