Wall Street experienced a significant downturn on Tuesday, reflecting heightened concerns over escalating trade tensions between the United States and China, as well as the prolonged U.S. government shutdown impacting investor sentiment.
Early trading saw all three major U.S. stock indexes plummet, particularly affecting the technology-heavy Nasdaq, which faced substantial losses driven by declines in major momentum stocks. Meanwhile, crude oil prices fell, and gold saw an uptick, surpassing the $4,100 mark as investors sought refuge in safe-haven assets.
The situation eased somewhat following a report from the International Monetary Fund (IMF), which adjusted its global growth predictions upwards, indicating that both tariff shocks and financial conditions had turned out to be less debilitating than previously feared. However, the IMF also cautioned that ongoing trade disputes could still have detrimental effects on economic output.
Oliver Pursche, a senior vice president at Wealthspire Advisors, noted the prevailing mood among investors, stating, “Investors are eager to take profits and protect their gains.” He emphasized that the recent sell-off on Friday had reinforced anxiety about the uncertain global landscape and the absence of forthcoming economic data due to the government shutdown.
As the United States and China implemented mutual tariffs on port fees, tensions escalated further. In an aggressive retaliatory move, President Trump threatened to increase tariffs on Chinese imports dramatically, following China’s announcement of tighter controls on rare earth exports.
Despite the beginning of the unofficial third-quarter earnings season, including positive results from major financial firms like JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo, market participants seemed primarily focused on the trade conflict. The ongoing government shutdown left many key economic indicators unavailable, compounding investor apprehension. A report from the National Association of Independent Business indicated a decline in small business sentiment, reigniting concerns regarding inflation.
The Dow Jones Industrial Average dipped 59.24 points, or 0.13%, settling at 46,008.34. The S&P 500 and Nasdaq Composite followed suit, declining 34.74 points (0.52%) to 6,619.98 and 229.87 points (1.01%) to 22,464.74, respectively.
In Europe, stocks also faltered, reaching a near two-week low as investor sentiment soured due to the U.S.-China trade tensions. French tire manufacturer Michelin’s decision to downgrade its annual forecast further exacerbated the situation, leading its shares to their lowest point in over two years. The MSCI index of global stocks slipped by 5.17 points, or 0.53%, while the pan-European STOXX 600 index fell by 0.35%.
Treasury yields exhibited a decline but recovered from their earlier lows after the IMF’s report assuaged some fears regarding trade issues. The yield on the benchmark U.S. 10-year note decreased by 0.7 basis points to 4.044%. Meanwhile, the 30-year bond yield saw a slight increase, and the yield on the 2-year note dropped, reflecting changing market expectations concerning interest rates.
Oil prices dropped amid ongoing trade war anxieties and an International Energy Agency report forecasting increased supplies that could weigh on demand. U.S. crude was down by 1.92%, settling at $58.35 per barrel, while Brent crude fell by 2.02% to $62.04.
The dollar experienced a slight decline, with safe-haven currencies like the Swiss franc and Japanese yen gaining ground. The dollar index fell by 0.11%, and the euro saw a modest increase of 0.18%. In the cryptocurrency sector, Bitcoin and Ethereum also suffered losses, reflecting broader market trends.
Gold prices rose amid rising expectations for rate cuts from the Federal Reserve and escalating demand for safe-haven assets. Spot gold increased to $4,129.56 per ounce, with U.S. gold futures following closely behind at $4,121.80 per ounce.
