Tariff Uncertainty Contributes To Sell-Off On Wall Street

After recovering from early weakness to end the previous session sharply higher, stocks showed a substantial move back to the downside during trading on Thursday. With the steep drops on the day, the Nasdaq and the S&P 500 tumbled to five and four-month closing lows, respectively.

The major averages moved roughly sideways going into the close, lingering near their worst levels of the day. The Nasdaq plummeted 483.48 points or 2.6 percent to 18,069.26, the S&P 500 plunged 104.11 points or 1.8 percent at 5,738.52 and the Dow slumped 427.51 points or 1.0 percent to 42,579.08.

The sell-off on Wall Street came as ongoing concerns about the economic impact of President Donald Trump’s new tariffs on Canada, Mexico and China led traders to cash in on Wednesday’s strong gains.

While Trump’s decision to grant a one-month tariff exemption for automakers contributed to a turnaround on Wednesday, uncertainty about further exemptions weighed on Wall Street.

Stocks saw continued weakness even after Trump granted temporary tariff exemptions for Canadian and Mexican goods that are compliant with the United States-Mexico-Canada trade agreement until April 2nd.

In U.S. economic news, the Labor Department released a report showing first-time claims for U.S. unemployment benefits fell by more than expected in the week ended March 1st.

The report said initial jobless claims dipped to 221,000, a decrease of 21,000 from the previous week’s unrevised level of 242,000. Economists had expected jobless claims to edge down to 235,000.

On Friday, the Labor Department is scheduled to release its more closely watched report on employment in the month of February.

The Commerce Department also released a report showing the U.S. trade deficit widened by more than expected in the month of January.

The report said the trade deficit surged to a record high $131.4 billion in January from a revised $98.1 billion in December. Economists had expected the trade deficit to jump to $123.0 billion from the $98.4 billion originally reported for the previous month.

The notably wider trade deficit came as the value of imports soared by 10.0 percent to $401.2 billion, while the value of imports increased by 1.2 percent to $269.8 billion.

Sector News

Semiconductor stocks turned in some of the market’s worst performances on the day, with the Philadelphia Semiconductor Index plunging by 4.5 percent to its lowest closing level in seven months.

Substantial weakness was also visible among airline stocks, as reflected by the 3.6 percent nosedive by the NYSE Arca Airline Index.

Computer hardware stocks also showed a significant move to the downside, dragging the NYSE Arca Computer Hardware Index down to its lowest closing level in a month.

Networking, retail, commercial real estate and software stocks also saw considerable weakness, while telecom, oil and housing stocks bucked the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Thursday. Japan’s Nikkei 225 Index climbed by 0.8 percent, China’s Shanghai Composite Index jumped by 1.2 percent and Hong Kong’s Hang Seng Index surged by 3.3 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.’s FTSE 100 Index slid by 0.8 percent, the French CAC 40 Index rose by 0.3 percent and the German DAX Index shot up by 1.5 percent.

In the bond market, treasuries regained ground after coming under pressure in early trading but still closed modestly lower. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up 2.1 basis points to 4.286 percent.

Looking Ahead

The Labor Department’s monthly jobs report is likely to be in the spotlight on Friday, although traders are also likely to keep an eye on remarks by several Federal Reserve officials, including Fed Chair Jerome Powell.

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