US stock sell-off worsens amid escalating trade war

The S&P 500 dropped 2.7%, the Dow tumbled 970 points, and the Nasdaq sank 3.1% on Friday, hitting their lowest levels since last August and extending the previous session’s sharp sell-off.

US stock sell-off worsens amid escalating trade war

The latest plunge came as fears over a full-blown trade war intensified, following China’s announcement of a sweeping 34% tariff on all U.S. imports—effectively mirroring the levy imposed by President Trump just two days earlier. The tit-for-tat moves between the world's two largest economies have triggered alarm bells across Wall Street, with investor sentiment turning increasingly risk-averse. Anxiety is mounting over the potential economic fallout, as markets begin to price in the long-term impact of higher consumer prices, strained supply chains, and weakening corporate profits. Many economists are now warning that the ongoing trade standoff could tip the U.S. economy into a recession by the second half of the year, especially if retaliatory measures continue to escalate without diplomatic resolution.

Stocks down despite surprisingly strong labor market data

Ironically, the downbeat market reaction came despite surprisingly strong labor market data. Nonfarm payrolls surged well above expectations, highlighting continued resilience in the job market. However, investors largely shrugged off the good news, interpreting it as a double-edged sword—supportive of consumer spending, but potentially complicating the Federal Reserve's path on interest rates, particularly in a volatile inflationary environment. Losses were broad-based across sectors, with energy leading the decline as oil prices slumped on concerns over weakened global demand. Industrials and materials also posted steep losses, reflecting concerns about a slowdown in manufacturing activity and commodity demand. Tech megacaps, which have played a dominant role in driving the bull market, were hit hard: Apple fell 3%, Microsoft slipped 2.1%, Nvidia dropped 4.3%, Amazon and Meta both lost 4.5% and 4.3% respectively, Alphabet shed 1.3%, and Tesla tumbled 5.2%. For the week, the Nasdaq has dropped 4.5%, the S&P 500 is down 3.3%, and the Dow has declined 2.5%—marking the worst weekly performance for U.S. equities since early 2023. All eyes are now on upcoming comments from the Federal Reserve and the U.S. Treasury, as markets seek clarity on policy responses and the potential for any de-escalation in trade tensions.