The worst day since April 10, when the tariff-induced selloff shook global markets, saw the S&P 500 Index plummet 2.7%, wiping away its weekly gain.
Trump Tariffs Trigger Selloff
Following President Donald Trump’s warning of “a tremendous increase of taxes on Chinese items” coming into the US, US equities had their biggest selloff in six months on Friday, ending a months-long calm on Wall Street.
The worst day since April 10, when the tariff-induced selloff shook global markets, saw the S&P 500 Index plummet 2.7%, wiping away its weekly gain. 3.5% fell in the Nasdaq 100 Index. The so-called Magnificent Seven firms’ basket fell 3.8%, with Nvidia Corp. falling about 5% and Tesla Inc. and Amazon.com Inc. suffering the worst losses.
For the first time since April, Wall Street’s primary indicator of worry, the Cboe Volatility Index, or VIX, crossed the 20-point barrier, which usually indicates growing market stress.
Trade War Sparks Decline
After Trump revived concerns about a worsening trade war by claiming he saw “no reason” to meet with Chinese President Xi Jinping, citing recent “hostile” export limits on rare-earth minerals, risk-on sentiment faltered. “There are many other actions that are, likewise, under serious consideration,” Trump said, adding that one countermeasure the US is thinking about “is a big increase in Tariffs on Chinese items coming into the United States of America.”
Dan Greenhaus, chief economist and strategist of Solus Alternative Asset Management LP, said that the stock market “certainly suffered a leg down around the time of the ‘massive rise‘ report.” For many investors, the tariff problem seemed resolved. There was a recognition of the current situation. A “huge rise” in tariffs on the nation from which we import the most products disturbs the status quo and calls for reconsideration.
Wall Street saw extensive falls as a result of growing tensions between the two biggest economies in the world. The S&P 500 had over 420 companies plummet, or almost 84%, while just 15% of the index increased.
Technology Stocks Lead Decline
While consumer staples, a defensive sector with firms that often have comparably modest valuations and deliver substantial dividends, was the only sector to advance, 10 of the eleven sectors in the S&P 500 saw weaker trading, with drops in technology shares leading the way. With a 3.7% increase, PepsiCo Inc., which is part of the staples category, was the S&P 500’s best-performing stock.
US equities fell as a result of a selloff in the more speculative areas of the market. Unprofitable IT businesses in a Goldman Sachs basket dropped 4.3%. The most shorted businesses lost 4.1%, and the Russell 2000 Index fell 3%, its lowest day since April. A UBS stock basket that tracks tariff losers fell 4.7%. The VVIX Index, which gauges the VIX’s volatility, rose to its highest point since April.
Mosaic was one of the largest S&P 500 decliners among individual stock movers, falling 9.2% after the fertilizer firm said that third-quarter phosphate output was lower than management had anticipated, citing electrical outages at one facility and mechanical problems at another.
Qualcomm Drops, Applied Rises
In other news, Qualcomm’s stock dropped 7.3% due to a Chinese antitrust probe into the company’s acquisition of Autotalks, a developer of connected car technologies. Following the announcement that it is now in advanced negotiations with a hyperscaler customer for its second data center campus in North Dakota, Applied Digital saw a 16% increase in value.
It should not come as a huge surprise that the market can quickly recover from headline danger after one of the greatest rises in history in only six months, according to David Wagner of Aptus Capital Advisors. “This is typical, but it should not be a cause for market pessimism.”
Investors Eye Q3 Earnings
Traders are now focusing on corporate results, which begin on Tuesday with major banks like JPMorgan Chase & Co. Bloomberg Intelligence’s research points to a 7.4% increase in S&P 500 earnings in the third quarter compared to the same period last year. In the last four years, that preseason prediction has been the second-highest.
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