The US stock market took a major hit on Wednesday, with trade war tensions overshadowing better-than-expected inflation data. After starting the day strong, the Dow Jones Industrial Average (^DJI) reversed sharply, closing down 354 points (-0.9%), while the S&P 500 (^GSPC) dropped 0.3%, pushing it closer to correction territory.
The Nasdaq Composite (^IXIC) managed a 0.3% gain, supported by a Big Tech rally, but broader markets struggled as investors weighed the fallout of Trump's aggressive tariff policies.
The Trump administration's surprise decision to double tariffs on Canadian steel and aluminum caught investors off guard. This comes as part of a broader US-Canada trade dispute, exacerbated by Ontario's new 25% fee on electricity exports to the US.
“The market was hopeful inflation was cooling, but Trump’s tariff war is creating an entirely new risk factor,” said Goldman Sachs analysts. “This could push inflation higher and slow growth—raising the risk of stagflation.”
The Consumer Price Index (CPI) showed a 2.8% annual increase in February, lower than the 3% rise in January. Key takeaways:
“This inflation data is good news,” said Jeff Schulze of ClearBridge Investments. “But Trump’s tariffs could offset these gains and keep prices elevated longer than expected.”
Despite broader market weakness, Big Tech stocks surged, leading the Nasdaq into positive territory.
With the S&P 500 now nearly 10% off its February highs, investors are bracing for a potential market correction.
“Stocks had been running hot, so a correction isn’t surprising,” said Dave Grecsek of Aspiriant Wealth Management. “But trade war risks add a new layer of uncertainty.”
With market volatility rising, traders are cautious but watching for opportunities.
Will the Fed step in, or will Trump’s trade war keep markets under pressure?
Stay tuned for more updates.
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