U.S. stocks ended lower on Thursday, with the S&P 500 dropping 2.3%, the Nasdaq 100 falling 2.7%, and the Dow Jones plunging approximately 670 points. The sharp pullback came after Wednesday's historic rally, which had been fueled by President Trump’s announcement of a 90-day pause on tariffs for most U.S. trading partners — excluding China — to allow for negotiations.
US stocks lower as tariff-pause rally fades
While this announcement offered temporary relief, the decision to maintain the 125% tariff rate on Chinese goods kept concerns over the ongoing trade war front and center, limiting the market's optimism. Despite the pause in new tariffs, market volatility is expected to persist as investors remain cautious, reassessing the broader economic fallout of the trade dispute and its impact on corporate earnings, consumer spending, and global growth.
Investor sentiment remains fragile, with markets grappling with both geopolitical uncertainties and domestic economic concerns. The trade war, combined with the potential for further tariff hikes, keeps traders on edge, while broader questions around inflation, consumer demand, and global supply chains continue to loom large. On the data front, all key components of the Consumer Price Index (CPI) came in softer than anticipated, signaling that inflation pressures are still relatively subdued. While this has provided some relief to markets, the full economic impact of recently imposed tariffs is expected to become more evident in the coming months, as supply chain disruptions, higher costs for imported goods, and potential slower global growth weigh on consumer prices.
Initial jobless claims came in line with expectations
In terms of labor market data, initial jobless claims came in line with expectations, showing little change from the previous weeks, suggesting that the U.S. job market remains relatively stable for now. However, the uncertainty surrounding the trade conflict, coupled with broader economic slowdowns, could put future hiring and wage growth at risk. The combination of softer inflation data and steady jobless claims may leave the Federal Reserve with limited room to adjust monetary policy in response to any economic shocks, creating a more delicate balancing act for policymakers.
How stocks are performing
Sector performance was broadly negative, with the tech and energy sectors leading the losses. The tech sector, which had experienced significant volatility amid shifting trade policies and concerns over Chinese demand, saw heavy declines as investors reassessed the outlook for tech companies with significant exposure to China. Similarly, the energy sector was hit hard, as concerns over global oil demand — exacerbated by the trade war — weighed on prices and earnings expectations for energy companies. The market’s focus on these sectors reflects the broader uncertainty surrounding global supply and demand dynamics, with investors uncertain about how prolonged trade tensions and an unpredictable economic environment will affect growth in these critical industries.
With trade tensions still unresolved and economic indicators showing mixed signals, investors are expected to continue navigating a bumpy road, with heightened caution and volatility likely to persist in the short term.
