Stocks tumbled on Tuesday as President Trump’s broad tariffs against Canada, Mexico and China reverberated through global markets, intensifying investors’ concerns over the health of the economy.
The S&P 500 fell as much as 2 percent, before losses moderated in the afternoon and the day ended down 1.2 percent. The tech-heavy Nasdaq Composite index briefly dropped into what is known as a correction — a drop of 10 percent or more from its recent peak — before investors appeared to “buy the dip,” prompting a modest recovery in afternoon trading.
The selling on Tuesday was broad based, with roughly 80 percent of the stocks in the S&P 500 lower for the day. That was true even after the afternoon rally, with the recovery propelled by some of the largest tech companies like Nvidia and Alphabet, which have a large impact on the overall index’s value because of their size. Out of 11 sectors, tech was the only one to end the day higher and it was only by a fraction of a percentage point.
Sharp declines on Wall Street in recent days have wiped out the gains made since Mr. Trump’s election victory in November, as investors’ hopes of deregulation, business-friendly policies and restraint on tariffs have given way to fears over the potentially damaging impact of the levies that went into effect on Tuesday.
Investors appeared to rush into the safety of government debt, initially helping to lower the yield on the 10-year Treasury note to its lowest level since October, before reversing course later in the afternoon. Yields move inversely to prices. Mounting concerns about the economy’s ability to withstand incoming tariffs for too long were also evident in a shift in investor expectations of the number of times the Federal Reserve will cut interest rates.
In the near term, tariffs are likely to accelerate inflation, with the Fed holding rates elevated to deal with it. But the longer-term effect, economists say, will be slower economic growth and the risk of an economic downturn, in which the Fed would very likely rapidly cut interest rates.
