NEW YORK: Wall Street fell sharply for a second straight session on Friday, pushing the Nasdaq toward a bear market, after China imposed fresh tariffs on all US goods in response to the Trump administration’s sweeping levies, escalating a global trade war.
China’s finance ministry said on Friday it would impose additional tariffs of 34% on all US goods from April 10 after US President Donald Trump raised tariff barriers to their highest level in more than a century this week.
The tariff war has sent shockwaves through global financial markets and raised fears of an economic downturn, with investment bank JP Morgan forecasting a 60% chance of the global economy entering a recession by year-end, up from 40% previously.
The Nasdaq Composite fell 4.07% to 15,877.69 by 11:36 a.m. ET, shedding 20% from its all-time closing high touched in December. If the index closes below that mark, it would confirm a bear market.
The S&P 500 and the Nasdaq were poised to mark their biggest weekly drop since March 2020, and the Dow was on course for its biggest weekly decline since October 2020.
“Recession risk is a significant concern here. Tariffs could wipe out growth and markets are reflecting that. This bull market picture that we had in front of us is now being completely rewritten,” said Dana D’Auria, co-chief investment officer at Envestnet.
Wall Street’s main indexes posted their biggest single-day percentage declines in years on Thursday after Trump imposed a 10% tariff on most imports into the United States and much higher levies on dozens of other countries.
Investors have shunned riskier assets including stocks and commodities in recent weeks on bets that the tariffs will spark an economic slowdown, prompting them to seek safer assets such as government bonds and gold.
Federal Reserve Chair Jerome Powell on Friday highlighted that Trump’s unexpectedly hefty tariffs could trigger higher inflation and slower growth, setting the stage for challenging decisions ahead for the central bank.
Traders continued to anticipate a more accommodative policy from the US central bank, with money market futures pricing in cumulative rate cuts of 100 basis points by the end of this year, compared with about 75 bps a week earlier.
The Dow Jones Industrial Average fell 3.49% to 39,128.86 points, dropping 10% from its record close and on course to confirm a
correction. The S&P 500 dropped 4.07% to 15,877.69.
US-listings of Chinese companies dived, with JD.com and Alibaba and Baidu shedding over 9% each.
Companies with exposure to China also fell across the board, with mega-caps such as Apple falling 4.7%.
The CBOE Volatility index, known as Wall Street’s fear gauge, hit its
highest level in eight months at 34.71 points.
US bank stocks dropped further on Friday, with the sector under pressure globally, as investors anticipated more interest rate cuts from central banks and a hit to economic growth from tariffs.
The yield on the benchmark 10-year Treasury notes was down to a six-month low of 3.938%.
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