Ain’t No Rest For Stocks – US Market Wrap
Wall Street experienced wild swings for the fourth straight session as back-and-forth trade threats between the United States and China sent stocks lower, wiping out an earlier surge that was the largest since 2022. The S&P 500 dropped 1.6%, putting it on the verge of a bear market.
Hopes for a speedy end to excessive volatility were dashed when a White House official announced that the US will impose tariffs on China of up to 104%. Equities fell further as Chinese Premier Li Qiang stated his country had the policy tools to “fully offset” unfavourable external shocks. Treasury two-year rates fell as traders increased bets on rate decreases.
Tuesday’s plunge expanded the S&P 500’s more than 10% decline since the president announced global tariffs that he claims are critical to restoring American economy.
Trump spent the last hours before his sweeping tariffs went into effect arranging discussions with key US allies, but expectations for a last-minute deal with China remained dim.
Across global markets, investors have been seized by anxiety that something would break in the financial plumbing amid cross-asset volatility, prompting speculation that the Federal Reserve will need to accelerate rate reduction to avoid a recession, despite widespread inflation concerns.
The Fed’s Daly stated that the US central bank can take its time before making any interest rate adjustments while it awaits the outcome of trade policy revisions. Her Chicago counterpart, Goolsbee, said tariffs are “way bigger” than he expected.
