Highlights
Stocks dropped again Tuesday as investors reacted to President Trump's latest tariff against China. The Dow Jones industrial average lost 2.1 percent, the S&P 500 fell 2.8 percent, and the Nasdaq was down 3.4 percent. US bond yields rose although shorter maturity yields declined. Oil prices dropped while the dollar weakened.
Stocks rallied massively in the morning as the market appeared to judge losses on the tariff news large enough to show capitulation selling and oversold conditions. The market also appeared hopeful for a softening in Trump's tariff stance with news of tariff negotiations with Japan and South Korea. But stocks fell back and the selloff resumed at midday as Trump said he would not back off on tariffs and the White House confirmed plans to proceed with an additional 50 percent tariff on Chinese goods that would bring the new additional tariff to 104 percent, effective on April 9. That followed China's statement that it would not remove its trade retaliation and would instead fight to the end in the trade war with Trump.
Upward pressure on bond yields added to negative pressure on stocks after a very poorly-received US Treasury 3-year note auction, where bidding was especially weak from foreign investors. This is a worrisome development given the US need to finance rising government borrowing at a time the dollar is weakening and concerns over US assets generally are rising.
Megacaps and semiconductor shares that led the rebound in the morning also led the selloff in the afternoon. Apple and Tesla were among the featured losers. Among sectors, worst were apparel, industrial metals, chemicals, airlines, energy and homebuilders. Holding up best were managed care, big banks, insurance, and cruise lines.
Stocks rallied massively in the morning as the market appeared to judge losses on the tariff news large enough to show capitulation selling and oversold conditions. The market also appeared hopeful for a softening in Trump's tariff stance with news of tariff negotiations with Japan and South Korea. But stocks fell back and the selloff resumed at midday as Trump said he would not back off on tariffs and the White House confirmed plans to proceed with an additional 50 percent tariff on Chinese goods that would bring the new additional tariff to 104 percent, effective on April 9. That followed China's statement that it would not remove its trade retaliation and would instead fight to the end in the trade war with Trump.
Upward pressure on bond yields added to negative pressure on stocks after a very poorly-received US Treasury 3-year note auction, where bidding was especially weak from foreign investors. This is a worrisome development given the US need to finance rising government borrowing at a time the dollar is weakening and concerns over US assets generally are rising.
Megacaps and semiconductor shares that led the rebound in the morning also led the selloff in the afternoon. Apple and Tesla were among the featured losers. Among sectors, worst were apparel, industrial metals, chemicals, airlines, energy and homebuilders. Holding up best were managed care, big banks, insurance, and cruise lines.
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.
