USarket

Tech and retail giants lead the slide amid trade war fears

 

A wave of terror washed over Wall Street after President of the United States of America, Donald Trump’s sudden news of imposing draconian new tariffs on imports led markets tumbling into a tailspin, erasing some US$1.7 trillion of market value within hours. The sudden and precipitous intensification of trade tensions, with up to 34 percent tariffs on imports from China, has shaken investors’ confidence and reignited concern of an international economic downturn. As the S&P 500 experienced its largest decrease in almost three years, with retail and tech titans were at the helm of the downturn in a violent day of selling that echoed across the world.

The size and timing of the tariffs, the across-the-board imposition of a 10 percent tax on all imports, along with steep surcharges for major trade partners were unexpected. Nasdaq dropped over 5 percent at its low, while Dow Jones Industrial Average fell more than 1,400 points. Financial experts cautioned that the damage could further escalate if talks with major economies sour, possibly pushing the US economy into a contraction.

 

Apple, Nike, and Semiconductor Stocks Take Heavy Hit

 

Technology and retail shares were among the worst-hit, mirroring their dependence on Chinese manufacturing hubs. Apple Inc, which produces the majority of its products in China, fell 8 percent, and Lululemon Athletica and Nike, tied to Vietnamese production bases, lost close to 10 percent. Dollar Tree fell 11 percent, and Walmart declined 2 percent as retailers braced for the possibility of more expensive imports.

The semiconductor industry also experienced sharp declines. The Philadelphia Semiconductor Index plummeted 6 percent, with Nvidia, Broadcom, and Micron Technology each losing over 5 percent. Heavies such as Boeing and Caterpillar, which derive a significant portion of their revenues from China, dropped at least 5 percent.

“This is a broad-based de-risking event,” said Garrett Melson, portfolio strategist at Natixis Investment Managers. “Right now, it’s about survival mode. Everyone’s stepping back.”

 

Dollar Falls, Oil Declines, and Rate Reductions in Limelight

 

Outside of equities, the knock-on effects also spilled over to commodities and currencies. Oil sank over 6 percent, taking ExxonMobil and Chevron down over 3 percent. The US dollar fell to a multi-month trough against the Japanese yen, as gold soared to new records in search of shelter.

JPMorgan economist Michael Feroli labelled the new tariffs, “the largest tax increase since 1968,” foreseeing a 1.5 percent inflation increase and a blow to personal income and consumption spending, Citigroup estimated Apple margins may fall as much as 9 percent in case it passes on the increased cost.

The CBOE Volatility Index jumped to 26.91, a gauge of investor nervousness. With hopes building for the Federal Reserve to cut interest rates several times this year, eyes are now on Friday’s employment numbers and Fed Chairman Jerome Powell’s address for clues on what’s next. UBS strategist Bhanu Baweja cautioned, “the risk of the S&P 500 declining below 5,000 is very real unless tariff uncertainties dissipate.”