Tech stocks led a sharp market sell-off on Thursday, as Donald Trump’s latest threat to impose steep tariffs on imports from major trading partners added to investors’ concerns about the health of the US economy.
The blue-chip S&P 500 lost 1.6 per cent, taking its decline since last Wednesday to 4.2 per cent and erasing the market’s year-to-date gains.
The tech-heavy Nasdaq Composite closed down 2.8 per cent, with Nvidia shedding 8.4 per cent even after the chipmaker overnight reported an almost 80 per cent jump in revenue.
Investors’ lukewarm response to Nvidia’s earnings left the market vulnerable to bad macroeconomic news, according to investors. The US president’s latest barrage of announcements on Chinese, Mexican and Canadian imports, announced on Thursday, come after data released in recent days indicated a sharp drop in US consumer and business sentiment.
“Nvidia didn’t save the world,” said Mike Zigmont, co-head of trading at Visdom Investment Group. “The results were great but not so mind-blowingly great that everyone wants to buy more stocks.”
“Bears are winning the battle right now,” he added.
US stocks had climbed after Trump’s election in November on hopes the new administration would enact pro-business economic policies, pushing the S&P 500 to its latest record high as recently as last Wednesday.
But the index has slipped in recent days, as worries about the health of the US economy sparked by a flurry of gloomy economic data have begun to weigh on sentiment.
Retail investors, who have so often stepped in to buy stocks whenever the market dips, are suddenly gripped by “unease”, according to VandaTrack, a data company that monitors retail trading flows.
US government debt sold off as equities tumbled, with the 10-year Treasury yield, which moves inversely to prices, up 0.03 percentage points at 4.28 per cent.
Treasuries, considered a safe haven during periods of market volatility, rallied in recent weeks as a growing list of data point to a worsening outlook for the world’s biggest economy.
A measure of the dollar’s strength against a basket of six other major currencies rose 0.8 per cent.
Fears of an impending economic slowdown look overblown to some market participants, however.
After a strong end to 2024, weak consumer sentiment data released over the past week has given “over-extended markets the opportunity to correct”, said Steven Blitz, chief US economist at TS Lombard.
“The Trump recession? Not so fast,” he added.