U.S. Stock Markets Decline Amid Tariff Tensions and Economic News

The S&P 500 Index ($SPX) (SPY) fell -0.76% on Tuesday, joining the Dow Jones Industrials Index ($DOWI) (DIA), which dropped -1.14%, and the Nasdaq 100 Index ($IUXX) (QQQ), down -0.28%. March E-mini S&P futures (ESH25) also decreased by -0.76%, while March E-mini Nasdaq futures (NQH25) lost -0.26%.

On Tuesday, stock indexes extended the sharp declines from Monday, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 all hitting 5-3/4 month lows. A late-day recovery was seen as short-covering occurred following reports that Canada would pause some retaliatory tariffs. Additionally, Ukraine indicated acceptance of U.S. plans for a truce with Russia in exchange for aid.

Tariff Pressure and Market Recovery

Stocks faced pressure on Tuesday after President Trump announced plans to raise tariffs on U.S. imports of steel and aluminum from Canada to 50%, up from 25%. This move was a response to Ontario’s imposition of a 25% export tariff on electricity shipments to the U.S. The market rebounded when Bloomberg reported that Ontario Premier Doug Ford would suspend the surcharge on U.S. power exports, contingent on a meeting with U.S. Commerce Secretary Lutnick on Thursday. Furthermore, President Trump suggested he might reconsider the newly imposed 50% tariffs on Canada.

Market sentiment also improved after the Magnificent Seven tech stocks began to recover from their prior losses. Economic news from the U.S. supported the market as well, with January’s JOLTS job openings rising by +232,000 to 7.74 million, surpassing expectations of no change at 7.60 million.

Sector Highlights

In sector-specific movements, Verizon Communications dropped more than -6%, leading declines in the telecommunications sector and weighing on the Dow Jones Industrial Average. Delta Air Lines saw its shares plunge over -7% after projecting weaker profit margins for Q1 due to declining travel demand.

Concerns over the economic impact of U.S. tariffs have pressured stocks throughout the past week. Last Tuesday, President Trump had already imposed a 25% tariff on goods from Canada and Mexico and increased tariffs on Chinese goods to 20% from 10%. However, he granted U.S. automakers a one-month exemption from these tariffs and temporary exemptions for compliant goods from Canada and Mexico throughout March.

Cryptocurrency and Economic Indicators

Bitcoin (^BTCUSD) rebounded over +4% on Tuesday, making up for more than half of its losses from the previous day, which stemmed from disappointment over the government’s new crypto reserve policies.

This week, investors are focused on the upcoming U.S. CPI report, anticipated to show a slight easing to +2.9% year-over-year from +3.0% in January. The core CPI is expected to ease marginally as well. Additionally, U.S. trade policies will remain in the spotlight, with the new steel and aluminum tariffs going into effect. The February final-demand PPI is projected to show a decrease, and the University of Michigan’s March consumer sentiment index is expected to dip slightly. Furthermore, Congress faces a deadline on March 15 to approve a spending bill to avoid a government shutdown.

Currently, the market assesses a 4% probability of a -25 basis point rate cut at the next FOMC meeting scheduled for March 18-19.

Global Market Overview

Overseas stock markets ended mixed on Tuesday. The Euro Stoxx 50 fell to a one-month low, closing down -1.43%, while China’s Shanghai Composite Index gained +0.41%. Japan’s Nikkei Stock 225 also declined, falling to a 5-3/4 month low with a drop of -0.64%.

Interest Rates and U.S. Treasury Notes

June 10-year T-notes (ZNM25) closed down -15.5 ticks, with the 10-year T-note yield increasing by +7.3 basis points to 4.286%. T-notes settled moderately lower after a rebound in stocks diminished demand for safe-haven investments. The robust demand for the $58 billion auction of 3-year T-notes helped limit losses, with a bid-to-cover ratio of 2.70, well above the 10-auction average of 2.60.

European bond yields also rose, with the 10-year German bund yield up +6.4 basis points to 2.897%, and the 10-year UK gilt yield increasing +3.1 basis points to 4.674%. Expectations are now set at 50% for a -25 basis point rate cut by the ECB at its April 17 policy meeting.

Key Stock Movements

The Magnificent Seven tech stocks saw gains on Tuesday, recovering from earlier plunges. Tesla (TSLA) rose more than +3%, while Nvidia (NVDA), Amazon.com (AMZN), and Meta Platforms (META) gained more than +1%. Microsoft (MSFT) saw a slight increase of +0.08%.

Conversely, travel stocks struggled on Tuesday, led by a major fall in Delta Air Lines (DAL) by -7%. Delta reduced its Q1 adjusted earnings per share forecast significantly below consensus expectations. Additionally, Marriott International (MAR) and Host Hotels & Resorts (HST) closed down more than -4% and -3%, respectively, with other travel stocks also seeing declines.

The telecommunications sector was notably weak, with Verizon Communications (VZ) leading losses down by -6%. AT&T (T) and T-Mobile US (TMUS) each dropped more than -3% following investor concerns about competitive challenges for the companies.

In the semiconductor space, stocks faced declines, with GlobalFoundries (GFS) plummeting over -67% to lead losses in the Nasdaq 100. Other notable declines included Texas Instruments (TXN) and ARM Holdings Plc (ARM), both down more than -4%.

Negative forecasts were also seen for several companies. Teradyne (TER) fell more than -17% after projecting flat to down revenue for Q2. Oracle (ORCL) and Kohl’s (KSS) also reported disappointing figures, with declines in respective share prices of more than -3% and -24%.

Amidst some positivity, cybersecurity stocks gained as Elon Musk highlighted a significant cyberattack on X. Crowdstrike Holdings (CRWD) soared more than +6%, while Palo Alto Networks (PANW) rose over +3%.

Southwest Airlines (LUV) experienced a strong day, closing up over +8% following news of their accelerated share repurchase plan. Boeing (BA) and Elevance Health (ELV) also posted gains, with both companies announcing positive operational updates.

Earnings Reports on the Horizon

Upcoming earnings this week include reports from Adobe Inc (ADBE), Crown Castle Inc (CCI), SentinelOne Inc (S), and UiPath Inc (PATH).

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.

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