Equity Markets Slide as Trade Tensions Escalate

The S&P 500 Index ($SPX) (SPY) is down -1.75%, the Dow Jones Industrials Index ($DOWI) (DIA) has fallen -1.80%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.40%. March E-mini S&P futures (ESH25) show a decrease of -1.74%, while March E-mini Nasdaq futures (NQH25) are down -1.52%.

Stock indexes are sharply declining for a second consecutive session. The S&P 500 and Nasdaq 100 have hit 4-month lows, while the Dow Jones Industrials has reached a 7-week low. Investors are increasingly concerned about escalating global trade tensions, which are impacting equity markets. New US tariffs took effect today on imports from Canada, Mexico, and China, adding further pressure on bank stocks and energy producers, contributing to the broader market’s losses.

The Barchart Brief: Your FREE insider update on the biggest news stories and investing trends, delivered midday.

In response to US tariffs, Canada announced counter-tariffs on US-made products, including a 25% tax on approximately C$30 billion ($20.6 billion) in goods. This package includes a second wave of tariffs targeting C$125 billion of US exports, expected to affect major items like cars, steel, and aluminum, and highlighting the critical trade relationship between the two nations.

Additionally, China revealed tariffs of up to 15% on US agricultural goods, effective March 10, alongside a ban on trade with some US defense companies, further escalating the trade conflict.

Market observers will be attentive to President Trump’s upcoming address to a joint session of Congress on Tuesday evening. On Wednesday, the February ISM services index is anticipated to decline by -0.1 point to 52.7. On Friday, the February nonfarm payrolls are projected to increase by +160,000, while the February unemployment rate is expected to hold steady at 4.0%. Furthermore, February average hourly earnings are anticipated to remain unchanged from January at +4.1% y/y. On the same day, Fed Chair Powell will deliver a keynote speech discussing the economic outlook at Chicago Booth’s 2025 US Monetary Policy Forum.

Currently, markets are pricing in a 12% probability of a -25 bp rate cut at the upcoming Federal Open Market Committee (FOMC) meeting scheduled for March 18-19.

Overseas Market Performance

International stock markets showed mixed results today. The Euro Stoxx 50 fell to a 2-1/2 week low, dropping -2.85%. In contrast, China’s Shanghai Composite Index recovered from a 3-week low, closing up +0.22%. Meanwhile, Japan’s Nikkei Stock 225 declined to a 5-1/2 month low, down -1.20%.

Interest Rates

June 10-year T-notes (ZNM25) increased by +10 ticks, with the 10-year T-note yield falling -1.3 bp to 4.145%. Prices for June T-notes climbed to a 4-1/2 month high. The drop in the 10-year T-note yield reached a 4-1/2 month low of 4.104%. These gains in T-notes followed support from Monday’s weaker-than-expected US ISM and construction spending reports. Additionally, today’s US tariffs on Canada, China, and Mexico heightened concerns about global growth, further fueling demand for T-notes. The decline in equity markets also increased the safe-haven appeal of T-notes.

European bond yields trended lower, with the 10-year German bund yield declining -0.6 bp to 2.485%, and the 10-year UK gilt yield dropping -4.5 bp to 4.509%.

The Eurozone’s January unemployment rate remained unchanged at a record low of 6.2%, surpassing expectations of 6.3%.

Market swaps reflect a 99% probability for a -25 bp rate cut by the European Central Bank (ECB) at the policy meeting scheduled for March 6.

US Stock Movers

Weakness among the Magnificent Seven Technology stocks is weighing heavily on the overall market. Meta Platforms (META) has decreased more than -4%, while Amazon.com (AMZN) is down over -2%. Additionally, Nvidia (NVDA) and Microsoft (MSFT) have each fallen more than -1%.

Tesla (TSLA) reported a significant -6% drop after revealing that its February vehicle deliveries in China plummeted -49% year-over-year to 30,688 units.

Bank stocks are facing substantial pressure today. Citigroup (C) has decreased by more than -7%, with KeyCorp (KEY), Bank of America (BAC), Morgan Stanley (MS), Wells Fargo (WFC), Discover Financial Services (DFS), and Capital One Financial (COF) all down over -6%. Furthermore, Goldman Sachs (GS), American Express (AXP), and Northern Trust (NTRS) have each dropped more than -5%, while Fifth Third Bancorp (FITB), JPMorgan Chase (JPM), and M&T Bank Corp (MTB) are down more than -4%.

In the energy sector, prices for WTI crude oil fell over -1%, reaching a 2-3/4 month low, which negatively impacted energy producers and service providers. Companies like Baker Hughes (BKR), Halliburton (HAL), Marathon Petroleum (MPC), and Phillips 66 (PSX) are down more than -4%, while APA Corp (APA), ConocoPhillips (COP), Diamondback Energy (FANG), and Schlumberger (SLB) are down over -3%.

Cruise line operators and travel-related stocks decreased today due to worries about trade tensions affecting global growth. Royal Caribbean Cruises Ltd (RCL), Carnival (CCL), Delta Air Lines (DAL), United Airlines Holdings (UAL), and Norwegian Cruise Line Holdings (NCLH) have all dropped more than -6%.

Conversely, defensive food producers and consumer durable stocks gained amid the broader market selloff. Companies like Hershey (HSY), General Mills (GIS), Mondelez International (MDLZ), and Yum! Brands (YUM) are all up more than +2%. Additionally, JM Smucker (SJM), Procter & Gamble (PG), PepsiCo (PEP), Campbell Company (CPB), Conagra Brands (CAG), and Kimberly-Clark (KMB) have risen by more than +1%.

Best Buy (BBY) is a notable loser, down over -13% after projecting full-year adjusted EPS of $6.20 to $6.60, with the midpoint falling below the consensus of $6.55.

Illumina (ILMN) is down more than -1% after China’s trade restrictions on the company’s genetic sequencing products as part of broader retaliatory measures against US tariffs on Chinese goods.

On a positive note, Okta (OKTA) surged over +19% after reporting Q4 revenue of $682 million, exceeding the consensus estimate of $669.8 million, alongside stronger than expected forecasts for 2026 revenue at $2.85 billion-$2.86 billion, surpassing consensus estimates.

Walgreens Boots Alliance (WBA) rose by more than +6% leading gains in the S&P 500 after reports surfaced that Sycamore Partners is nearing an acquisition of the company.

ON Holding (ONON) increased over +4% after revealing a Q4 gross margin of 62.1%, better than the consensus of 61.7%. Labcorp Holdings (LH) is up more than +1% after Citigroup upgraded the stock to buy with a price target of $300.

Earnings Reports (3/4/2025)

Upcoming earnings reports include AutoZone Inc (AZO), Best Buy Co Inc (BBY), Crowdstrike Holdings Inc (CRWD), Ross Stores Inc (ROST), and Target Corp (TGT).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

More news from Barchart

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.