U.S. stocks continued their steep decline on Tuesday as sweeping tariffs on Canada, Mexico, and China officially took hold, stoking fears of slowing economic growth. By midday, the Dow Jones Industrial Average (DJI) was down 1.37% to 42,598.37, while the S&P 500 (GSPC) fell 1.08% to 5,786.48. The tech-heavy Nasdaq Composite (IXIC) shed 1.5%, furthering its losses and teetering on correction territory.
The sell-off wiped out all the market’s gains since the presidential election, reversing months of optimism fueled by pro-business policies. Investors are now grappling with the reality of rising trade tensions, elevated inflation, and growing signs of economic weakness, creating a precarious environment for equities.
Market Movers:
- Target (TGT) — Flat: Shares held steady despite delivering an earnings beat before the bell. The retail giant warned that newly imposed tariffs will weigh on first-quarter profits, causing investor caution. However, strong holiday sales and cost-cutting efforts helped offset some pressure, keeping the stock relatively unchanged in midday trading.
- Best Buy (BBY) — Down 2.4%: Shares declined after the company issued a muted annual sales forecast alongside its quarterly earnings beat. While profits exceeded Wall Street expectations, executives warned of softening consumer demand amid rising prices and economic uncertainty. The added concern over tariffs' impact on supply chain costs only heightened the market's negative sentiment toward the retailer.
- Apple (AAPL) — Down 1.8%: Shares fell as tech stocks broadly declined and investors grew increasingly concerned about the company’s exposure to escalating tariffs on Chinese imports. With a significant portion of its products manufactured in China, the latest round of duties threatens to raise costs and squeeze margins, fueling fears of weaker profitability in the quarters ahead.
- Caterpillar (CAT) — Down 3.1%: Shares dropped sharply as fresh tariffs on Canada, Mexico, and China amplified worries about global growth and infrastructure spending. As a major exporter with substantial international sales, Caterpillar is highly sensitive to trade tensions, and investors are bracing for a slowdown in equipment demand if cross-border projects stall.
- Tesla (TSLA) — Down 2.7%: Tesla slid following broader market weakness and growing concerns that tariffs could disrupt global supply chains, including critical components for electric vehicles. Additionally, fears of reduced consumer spending on high-ticket items in a slowing economy weighed on sentiment toward the automaker, which relies on steady demand for its premium-priced cars.
Tariffs Spark Global Retaliation
The market’s downturn accelerated after Canada announced retaliatory tariffs on U.S. imports, with China following suit by slapping 15% duties on U.S. farm products, including chicken and pork, effective March 10. While some viewed Beijing's response as measured, the tit-for-tat moves signal a deepening trade conflict with no clear off-ramp. The uncertainty is driving a risk-off sentiment as investors brace for a broader economic fallout from a protracted tariff war.
Bond Yields Plunge on Growth Fears
As stocks fell, bond markets saw a surge in demand, pushing the 10-year Treasury yield (TNX) down to around 4.15%, its lowest since late last year. The move highlights mounting fears that the tariffs will stifle economic growth and drag on the labor market. Analysts warn that while falling yields typically ease borrowing costs, this particular decline points to rising recession risks rather than optimism.
Fed Rate Cut Bets Intensify
Weaker economic data has pushed traders to price in three Federal Reserve rate cuts for 2025, a dramatic shift that underscores how quickly sentiment is deteriorating. Just a week ago, markets widely expected the Fed to hold rates steady, but as growth indicators slide and confidence plunges, investors now see a 50/50 chance of a cut as early as May. However, analysts caution that cuts driven by weakening fundamentals may not provide the market boost they once did.
Looking Ahead
Investors will continue watching for any signs of progress in trade negotiations, though few expect an imminent resolution. Economic data releases in the coming days—including consumer spending and labor market updates—will be crucial to assessing the real-world impact of tariffs. Until then, markets may remain under pressure, with volatility elevated as Wall Street digests the combined weight of trade tensions, softening growth, and shifting monetary policy expectations.