By Markets plunged deeper into the red Tuesday as a major sell-off prompted by fears of a slowing economy rolled on.
The S&P 500 was down as much as 0.9%. Year to date, the index is down about 5%, and has given up all the gains it had accrued after Donald Trump’s electoral victory in November.
The Dow Jones Industrial Average was off more than 500 points, or 1.3%. After briefly turning positive, the tech-heavy Nasdaq fell again by 0.4%.
Markets had been building some breathing room until just before noon Tuesday, when Trump announced he was seeking to impose retaliatory tariffs on Canadian steel and aluminum imports in response to Ontario’s decision to impose a 25% surcharge on electricity used by three U.S. states.
That sent stocks back to their session lows. Among the biggest losers were Delta Air Lines, Expedia Group, and Kohl’s, which plummeted 24% after issuing a negative outlook for the year ahead.
Earlier Tuesday, markets responded to warning signals from the airline industry about the state of the consumer: Three major carriers separately have warned in the past 24 hours they were seeing signs of slowing demand, compounded by ongoing jitters in the wake of the mid-air crash involving an American Airlines plane and a military helicopter over the Potomac earlier this year.
In a filing, American said “the revenue environment has been weaker than initially expected due to the impact of Flight 5342 and softness in the domestic leisure segment, primarily in March.”
That followed a filing from Delta that said its revenues were being affected “by the recent reduction in consumer and corporate confidence caused by increased macro uncertainty, driving softness in Domestic demand.”
Finally, Southwest Airlines slashed its earnings guidance for the rest of the year.
Investors are throttling back their expectations for stocks amid growing uncertainty and as Trump signals he will be less focused on equities than in his first term. It represents a sea-change from the approach he took in his first term, when Trump was fixated on markets as a real-time barometer of his success.
Trump is leaning less on market sentiment at a time when their performance is set to be noticeably weaker. Early Monday, analysts with Citigroup downgraded their rating of U.S. stocks from “overweight” to “neutral,” saying the exceptionalism of U.S. firms’ financial performance looks to be “pausing” amid weaker jobs growth, as well as a short-term momentum loss for artificial intelligence investments. It was the second-major downgrade from a Wall Street firm in as many days, with HSBC making the same call Monday.
And Barclays analysts issued new guidance that the picture for U.S. stocks is rapidly changing.
“The U.S. economy is clearly softening, despite an OK jobs report … US equities have de-rated quickly, but don’t depend on a ‘Trump Put’ yet”
Investors received another piece of worrisome news Monday, when The National Federation of Independent Business reported its monthly small-business optimism survey showed a decline in February, though the index remained above the 51-year average for a fourth-consecutive month.
“Uncertainty is high and rising on Main Street, and for many reasons,” said NFIB Chief Economist Bill Dunkelberg said in a release. “Those small business owners expecting better business conditions in the next six months dropped and the percent viewing the current period as a good time to expand fell, but remains well above where it was in the fall. Inflation remains a major problem, ranked second behind the top problem, labor quality.”
Trump was set to meet with the Washington-based Business Roundtable later Tuesday to converse with American executives, Bloomberg News reported. Investors will be looking to see if the president gives any new guidance on his tariffs or broader economic policy objectives.
Wednesday could prove a further turning point in markets’ trajectories: the Bureau of Labor Statistics will report consumer inflation data for February. Forecasts were a slight softer reading compared with January — meaning price growth would have slowed — but any deviation could ripple through markets.
