U.S. stocks caved again on Tuesday as President Trump escalated his trade war with Canada, with the Dow Jones Industrial Average falling nearly 600 points and as the S&P 500 approached correction territory.
“We have a pretty good sized correction,” said Dan Greenhaus, chief strategist at Solus Alternative Asset Management. Still, “10% declines happen more than people think,” according to Greenaus, who noted that the current drop comes after a sizable six-month rally for stocks. “We’ve basically gone straight up.”
The hardest-hit sectors included energy, materials and industrials. All three sectors fell amid news that Mr. Trump was hiking tariffs on imports of steel and aluminum from Canada to 50% in response to the country’s largest province, Ontario, on Monday announcing a 25% surcharge on electricity exports to the U.S.
The president also said he would “substantially increase” other tariffs on Canada on April 2 if it does not rescind tariffs on U.S. dairy products and other goods.
“That’s kind of the problem for the market, now we have to wait until April 2” to learn of possible reciprocal actions, said Greenhaus, chief strategist at Solus Alternative Asset Management. “So there’s three weeks to make it worse.”
Shares of Stellantis thudded lower. The manufacturer of Jeep and Dodge vehicles has multiple production plants in Canada, and could be impacted by the latest escalation.
“The market has been down for three weeks in a row, largely driven by uncertainty about where trade policy lands, full stop. We’ve been inundated with tariff announcements that, unlike the 2018 playbook, are actually being applied universally versus the surgical approach we saw with term 1.0,” Art Hogan, chief market strategist at B. Riley Wealth, told CBS MoneyWatch. “Unless and until we know where the goal posts actually are on trade and tariffs, this uncertainty will continue to weigh on markets.”
In early afternoon trade, the Dow was off 525 points, or 1.3%, at 41,387. The blue-chip index earlier was down nearly 560 points, extending losses that had the Dow on Monday closing down 890 points.
About 9% below its record high established last month, the S&P 500 was lately down 45 points, or 0.8%, at 5,569.10, and the Nasdaq Composite fell 56 points, or 0.3%, to 17,412.
The sell-off came as Citigroup strategists lowered their view of U.S. equities, echoing other banks including JPMorgan Chase in curtailing bullish takes for 2025.
Stocks plunged on Monday, continuing three consecutive weeks of losses, with the technology-laden Nasdaq marking its worst day since September 2022 and the Dow closing beneath its 200-moving average for the first time since late 2023.
The losses came a day after Mr. Trump declined to say whether he expects a recession this year, telling Fox News that “I hate to predict things like that. There is a period of transition, because what we’re doing is very big.”
Guidance from Delta Air Lines added to concerns about the economy, with the carrier cutting its earnings outlook amid weaker U.S. demand.
