Highlights
Stocks dropped again Thursday as the market continues to choke on President Trump's chaotic rollout of tariffs. The Dow Jones industrial average lost 1.3 percent, the S&P 500 fell 1.4 percent, and the Nasdaq was down 2.0 percent. US bond yields fell in a renewed flight to safety. The dollar rose and oil prices declined.
Markets reacted badly to Trump's latest threat on Thursday to boost tariffs to 200 percent on European alcoholic drinks after the European Union struck back against Trump's imposition of tariffs on EU goods. The market did not react well to Trump's latest threat to raise tariffs on Canadian goods or his renewed call to take over Greenland, Canada and the Panama Canal.
Investors also did not appreciate another comment from Treasury Secretary Scott Bessent downplaying the negative market reaction to Trump's policies as a passing problem. The specter of a widening, disruptive trade war has rattled markets and raised worry about recession in the US and globally as businesses and consumers pull back and prices rise.
Another better than expected inflation report in Thursday's PPI-FD after Wednesday's pleasing CPI figures provided a ray of good news in a very grim market as it suggested scope for the Federal Reserve to ride to the rescue by cutting rates more aggressively this year to bolster slowing economic activity. Still, investors are bracing for tariffs to lift prices sharply over the next few months, which limits the Fed's scope for action. Markets do not expect the Fed to cut rates at its policy meeting next week.
In Thursday's action, weakness in megacaps and big technology shares hit the Nasdaq the hardest. Still, losses were large and widespread with the S&P 500 officially closing in correction territory, down 10.1 percent from its record high. Weakest sectors in the S&P 500 selloff are consumer discretionary, technology, communications services, materials, energy and industrials, all down more than 10 percent from their recent 52-week highs. Apple, the tech bellwether, is down more than 12 percent so far this week.
Markets reacted badly to Trump's latest threat on Thursday to boost tariffs to 200 percent on European alcoholic drinks after the European Union struck back against Trump's imposition of tariffs on EU goods. The market did not react well to Trump's latest threat to raise tariffs on Canadian goods or his renewed call to take over Greenland, Canada and the Panama Canal.
Investors also did not appreciate another comment from Treasury Secretary Scott Bessent downplaying the negative market reaction to Trump's policies as a passing problem. The specter of a widening, disruptive trade war has rattled markets and raised worry about recession in the US and globally as businesses and consumers pull back and prices rise.
Another better than expected inflation report in Thursday's PPI-FD after Wednesday's pleasing CPI figures provided a ray of good news in a very grim market as it suggested scope for the Federal Reserve to ride to the rescue by cutting rates more aggressively this year to bolster slowing economic activity. Still, investors are bracing for tariffs to lift prices sharply over the next few months, which limits the Fed's scope for action. Markets do not expect the Fed to cut rates at its policy meeting next week.
In Thursday's action, weakness in megacaps and big technology shares hit the Nasdaq the hardest. Still, losses were large and widespread with the S&P 500 officially closing in correction territory, down 10.1 percent from its record high. Weakest sectors in the S&P 500 selloff are consumer discretionary, technology, communications services, materials, energy and industrials, all down more than 10 percent from their recent 52-week highs. Apple, the tech bellwether, is down more than 12 percent so far this week.
Definition
Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.
Description
Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.
