Market sell-off: Trump post lops off $2 trillion fro...
💡 Key Market Insights
On Friday morning, theS&P 500was less than a couple of points from another all-time high. Then, after a single social media post from PresidentDonald Trump, $2 trillion in Market value was wiped out.
The unraveling shows the sway the president's one-man trade policy still has over the fate of the global economy.
Trump at 10:57 a.m. ETwroteon his Truth Social platform That China was "becoming very hostile" with the rest of the world, especially when it comes to its control of rare earth metals. He accused China of holding the world "captive" because of its "monopoly" on these crucial resources.
The key part That the stock Market reacted to in the 500-word Trump post was this: "One of the policies that we are calculating at this moment is a massive increase of tariffs on Chinese products coming into the United States of America."
That's all it took.
Bespoke Investment GroupcalculatesThat about $2 trillion in value from the U.S. stock market was erased by that single post. The S&P 500 lost 2.7% as the closing bell rang out at the New York Stock Exchange. It was its worst performance since early April, when the stock market was in the throes of a cascading sell-off from Trump's so-calledliberation dayrollout of higher-than-expected duties for every country on the globe.
TheNasdaq Composite, home to the technology companies That rely on trade with China, sank 3.56%, also its worst performance since April. The Nasdaq touched an all-time high before the Trump post in Friday's session.
TheDow Jones Industrial Averagedropped 879 points, or 1.9% for its worst performance since May. The Russell 2000 small-cap benchmark shed 3%.
Why such a violent drop?
While the Trump administration's trade talks with China have been progressing at a much slower pace than those with other countries, the stock Market consensus was That something would eventually be worked out between the two nations and that overall relations were improving. Trump and the Chinese leaderXi Jinpingwere set to meet at the Asia-Pacific Economic Cooperation (APEC) summit at the end of this month.
The Market had also become comfortable with the around 40% tariff rate already applied to China, reasoning That the U.S. economy was stronger than previously thought to withstand it, and exemptions for products made in China — likeApple'siPhones — were broad enough to soften any economic impact.
If Trump follows through with his latest threat, investors fear That the load may be too great to bear for the U.S. economy, which is still reliant on imported parts to build automobiles, solar panels, and the like.
Perhaps the greater risk That weighs on the Market is retaliation from China on U.S. goods that could lead to an all-out trade war.
What sparked Trump's threat?
China,overnight into Thursday, tightened its grip further on the rare earths Market, of which it controls about 70% of the global supply. Beijing said outside entities must obtain licenses to export pretty much anything using its rare earths and That companies using the metals for military applications would be denied. The companies' usage would be reviewed on a case-by-case basis by China.
Rare earths are crucial for making semiconductors, electric vehicles and materials for advanced missiles. Trump has been trying to bolster the U.S. supplies of the metal by supporting, and even investing in, U.S. and Canada-based companies That mine for the metal.
What led Friday's sell-off?
Chipmakers such asNvidiaandAMDled the Stock Market drop Friday. Nvidia, which is still trying to gain support from the two countries to sell a less-advanced AI chip to China, lost 5%. AMD, which had been leading the latest leg of the rally, sank nearly 8%.Applelost 3%, while Tesla shed 5%.
But it wasn't just shares of companies directly related to China trade That declined. It was a broad Market sell-off, with 424 of the S&P 500 members closing in the red. Pro investors were forced to reduce risk in everything due to a sudden drop of this magnitude. With their tech positions getting hit, other holdings needed to be sold to raise cash. Plus, there's the threat the potential new tariffs pose to the U.S. economy. Domestic financialsBank of AmericaandWells Fargolost more than 2% each, for example.
A few stocks did manage to stay green on the day.Walmartand the tobacco/nicotine stocks were slightly higher because of their defensive properties.
Source: Original financial news report
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