Equities Decline as Trade War Clouds Economic Outlook – US Market Wrap

Stocks slumped as the US imposed tariffs on automakers, raising concerns about a worsening trade war and offsetting statistics showing faster-than-expected growth in the world’s largest economy.

Just days before the completion of a quarter that is expected to be the worst for the S&P 500 since 2023, the gauge fell again. Toyota, Mercedes-Benz, and General Motors were among the automakers hit. Megacaps were mixed, with Apple higher and Nvidia lower. Bonds are indicating concerns about the impact of tariffs on inflation, with short-dated Treasuries outperforming longer-dated ones.

Trump issued a proclamation imposing a 25% tariff on auto imports and threatening heavier punishment on the EU and Canada if they joined forces against the US. The move offset data showing the economy expanded at a quicker pace in the fourth quarter than previously estimated. A measure of inflation was revised lower.

Just as the Trump administration moves forward with tariffs, inflation remains at a disquieting level for the Federal Reserve. Friday’s PCE Price Index excluding food and energy, the central bank’s preferred measure of underlying inflation, is expected to show signs of stickiness.

The S&P 500 fell 0.3%. The Nasdaq 100 dropped 0.6%. The Dow Jones Industrial Average fell 0.4 percent. AMD fell on an analyst downgrade. GameStop fell after investors reacted to its plans to go on debt in order to buy Bitcoin.

The yield on 10-year Treasuries increased one basis point to 4.36%. A $44 billion US issuance of seven-year bonds was soft. The dollar fluctuated. Mexico’s peso led losses in major currencies, with the nation reducing interest rates as inflation slows and the economy confronts the potential of additional US tariffs.