U.S. stock markets continued their sild for second successive days after a choppy session. Market participants’ confidence have shaken following President Trump’s decision to impose tariffs on three major trading partners of United States. 

Investors remained highly concerned about the impact of these tariffs on the country’s already elevated inflation rate. Moreover, recently released several soft key economic data clearly indicated the growing weakness in the U.S. economy. All three major stock indexes closed in negative territory on Tuesday.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) tumbled 1.6% or 670.25 points to close at 42,520.99. At intraday high, the blue-chip index was down nearly 843.5 points. Notably, 24 components of the 30-stock index ended in negative territory and 6 ended in positive zone. Year to date, the Dow is up just 0.3% trading almost at a flat line.

The tech-heavy Nasdaq Composite finished at 18,285.16 due to weak performance by technology bigwigs. In intraday trading, the tech-laden index was down 393.65 points and briefly traded in correction territory. 

A correction territory is defined as a fall of 10% or more from the asset’s recent high. Finally, the index closed at 9.3% lower from its recent high recorded on Dec. 16, 2024.The index has fallen 5.2% year to date, for the first time in past two years. 

The major loser of the index was Intel Corp. INTC. The stock price of the desktop and notebook chipset giant tumbled 6.2%. Intel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The S&P 500 depreciated 1.2% to finish at 5,778.15. In intraday trading, Wall Street’s most observed benchmark slid nearly 2%. The index has fallen 1.5% year to date. All 11 broad sectors of the broad-market index ended in negative territory. 

The Financials Select Sector SPDR (XLF), the Reat Estate Select Sector SPDR (XLRE), the Materials Select Sector SPDR (XLB), the Consumer Staples (XLP), the Industrials Select Sector SPDR (XLI), the Consumer Discretionary Select Sector SPDR (XLY) and the Energy Select Sector SPDR (XLE) tanked 3.5%, 1.2%, 1.4%, 1.7%, 2%, 1.8%, 1%, respectively. 

The fear-gauge CBOE Volatility Index (VIX) was up 3.2% to 23.51.  At intraday trading, the fear-gauge index touched 26.35, its highest since Dec. 20. A total of 18.42 billion shares were traded on Tuesday, higher than the last 20-session average of 15.87 billion. The S&P 500 posted 41 new 52-week highs and 43 new lows while the Nasdaq recorded 35 new 52-week highs and 595 new lows.

Trump’s Tariffs Dent Investor’s Confidence

Market participants were highly concerned about a global trade war. On Mar 4, the Trump administration imposed 25% tariffs on imports from Canada and Mexico and an additional 10% tariff on imports from China. China retaliated with additional tariffs of up to 15% on some U.S. imports. 

Canadian Prime Minister Justin Trudeau said his country retaliate with a 25% levy on U.S. products. Following this, President Trump has warned of more tariffs to be imposed on Canada. Mexican President Claudia Sheinbaum said that the country would respond with tariffs and other measures on U.S. imports by this weekend. 

Investors were skeptical regarding the impact of Trump’s tariffs on the U.S. economy. Inflation rate is still much higher than the targeted 2% level of the Fed. Tariffs will raise the cost of inputs and thereby inflation rate. Personal spending – the largest component of the U.S. economy – fell unexpectedly in January. 

Moreover, retail sales and building construction dwindled last month. Both the consumer sentiment and consumer confidence indexes failed to meet expectations in January. Manufacturing PMI for January and construction spending for December also came below expectations.

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