Market Plunge: $1.7 Trillion Lost Amid Tariff Fears
The U.S. stock market faced a dramatic downturn on Thursday, with approximately $1.7 trillion wiped from the S&P 500 Index. This significant loss comes in response to President Donald Trump’s announcement of extensive tariffs, raising concerns about a potential economic recession. Companies heavily reliant on overseas manufacturing were hit hardest, with major players like Apple and Nike experiencing steep declines.
Major Companies Suffer Significant Losses
The impact of the tariffs was felt across various sectors, particularly among companies with international manufacturing ties. Apple Inc., which produces most of its devices in China, saw its stock plummet by 8% shortly after trading began. Similarly, Lululemon Athletica Inc. and Nike Inc., both of which have manufacturing operations in Vietnam, experienced declines of around 10%. Retail giants Walmart Inc. and Dollar Tree Inc. also reported losses, with their stocks falling by 2% and 11%, respectively.
By 9:35 a.m. in New York, nearly 70% of S&P 500 companies were in the red, with almost half of them declining by 2% or more. The S&P 500 Futures dropped by 5%, while the Dow Jones Industrial Average futures fell by 2.8%, indicating a rough opening for U.S. markets. The Nasdaq futures also dropped by 3.8%. Oil prices took a hit, decreasing by more than 4%, and the U.S. dollar fell to its lowest level against the Japanese yen since early October.
Broader Economic Implications
The ramifications of Trump’s tariff announcement extend beyond immediate stock market losses. Analysts warn that the scope and intensity of these tariffs could disrupt global supply chains, exacerbate economic slowdowns, and drive inflation higher. Citigroup analysts noted that if Apple were to absorb the increased costs from tariffs, its gross margin could decrease by up to 9%.
JPMorgan economist Michael Feroli highlighted that this tariff plan represents the largest tax increase since 1968, potentially raising prices by 1.5% this year. This increase could adversely affect personal incomes and consumer spending, pushing the economy closer to a recession. Feroli emphasized that these impacts do not account for further declines in gross exports and investment spending.
Global Markets React to U.S. Tariff Strategy
The U.S. market’s turmoil has had ripple effects on international markets, although reactions have been less severe. Asian stocks fell by 0.7%, while the Stoxx Europe 600 index declined by 2.6%. The euro strengthened by 2% against the dollar, reflecting a shift in investor sentiment.
The semiconductor sector was particularly hard hit, with the Philadelphia Semiconductor Index dropping nearly 6%. Major companies like Nvidia Corp., Broadcom Inc., and Micron Technology Inc. saw their stocks decline by over 5%. Caterpillar Inc. and Boeing Co., which rely heavily on revenue from China, also experienced declines of at least 5%.
UBS Group AG’s Bhanu Baweja warned clients that if tariff uncertainties persist, the S&P 500 could face a significant downturn, with a near-term target of 5,300. However, if negotiations with trading partners do not improve, the risk of the index falling below 5,000 becomes increasingly likely.
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