U.S. Stocks Pull Back Sharply As Early Buying Interest Evaporates

Stocks moved sharply higher early in the session on Tuesday but showed a substantial downturn over the course of the trading day. The major averages pulled back well off their highs of the session and tumbled firmly into negative territory.

The major averages climbed off their worst levels going into the close but still posted significant losses on the day. The Nasdaq plunged 335.35 points or 2.2 percent to 15,267.91, the S&P 500 slumped 79.48 points or 1.6 percent to 4,982.77 and the Dow slid 320.01 points or 0.8 percent to 37,645.59.

Earlier in the day, the Dow had jumped by nearly 3.9 percent, while the S&P 500 and Nasdaq had both surged more than 4 percent.

With the downturn on the day extending the recent nosedive, the Dow and the Nasdaq dropped to their lowest closing levels in over a year and the S&P 500 hit a nearly one-year closing low.

The early rally on Wall Street partly reflected optimism about negotiations on President Donald Trump’s new tariffs that could help avoid a global trade war.

Treasury Secretary Scott Bessent said approximately 70 countries have approached the White House about trade talks, with Japan purportedly getting priority status.

“I think you are going to see some very large countries with large trade deficits come forward very quickly,” Bessent said during an interview on CNBC. “If they come to the table with solid proposals, I think we can end up with some good deals.”

Trump also said in a post on Truth Social that he had a “great call” with South Korea’s acting President Han Duck-soo and said the country’s “top TEAM is on a plane heading to the U.S., and things are looking good.”

Traders also looked to pick up stocks at reduced levels following the recent nosedive, which saw the major averages hit their lowest intraday levels in over a year on Monday before regaining ground.

Buying waned over the course of the session, however, as tensions over tariffs continue to rise between the U.S. and China.

China has vowed to “fight to the end” after Trump threatened to impose an additional 50 percent tariff on Chinese goods unless the country withdraws its new 34 percent tariff on U.S. goods.

A White House official told CNBC the effective tariff rate on China will spike to 104 percent at midnight, when Trump’s other “reciprocal tariffs” are also set to take effect.

Sector News

Oil service stocks came under considerable selling pressure over the course of the session, dragging the Philadelphia Oil Service Index down by 5.0 percent to its lowest closing level in over three years.

The sell-off by oil service stocks came as the price of crude oil pulled back sharply after rebounding earlier in the day, tumbling to its lowest levels in four years.

Substantial weakness also emerged among airline stocks, with the NYSE Arca Airline Index plummeting by 4.0 percent to a four-year closing low.

Biotechnology stocks also showed a significant move to the downside, as reflected by the 3.9 percent slump by the NYSE Arca Biotechnology Index.

Computer hardware, semiconductor, oil producer and housing stocks also moved notably lower amid another day of broad based weakness on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved sharply higher during trading on Tuesday. Japan’s Nikkei 225 Index spiked by 6.0 percent, while China’s Shanghai Composite Index jumped by 1.6 percent.

The major European markets also showed strong moves back to the upside. While the U.K.’s FTSE 100 Index shot up by 2.7 percent, the German DAX Index and the French CAC 40 Index both surged by 2.5 percent.

In the bond market, treasuries extended the sharp pullback seen over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 10.7 basis points to 4.262 percent.

Looking Ahead

Developments on the tariff front are likely to remain in the spotlight on Wednesday, while traders are also likely to keep an eye on the minutes of the latest Federal Reserve meeting.