Wall Street tumbles as Trump seeks more steel, aluminium tariffs

Stocks on Wall Street tumbled for a third day after President Donald Trump announced further tariffs on steel and aluminium imports.

The Cboe Volatility Index spiked 16%, while US government bonds strengthened.

“This is going to be effectively a tax increase,” says Brian Nick, chief investment strategist at Nuveen. “Certainly on some businesses and many consumers, and it will be counteracting the fiscal stimulus. In a vacuum, growth will be a bit lower this year because of the higher tariffs on goods that a lot of people buy.”

At the close of trading in New York, the Dow Jones Industrial Average plunged 420.22 points, or 1.7%, at 24,608.98, wiping out all of this year's gains. The S&P 500 shed 1.3% to 267.67 and the Nasdaq Composite also lost 1.3% to 7180.56.

All 11 major sectors of the S&P 500 fell, led by declines in shares of technology companies and industrial firms. Companies that use steel and aluminum to produce goods, such as car makers, were among the hardest hit stocks. Shares of Ford Motor shed 3.5%, while General Motors declined 4.6%.

Shares of several US.steel and aluminium companies, meanwhile, rose after the tariffs were unveiled, with US Steel gaining 4.8% and Century Aluminum adding 5.9%.

Bond prices rise
Bond prices jumped, sending the yield on the benchmark 10-year Treasury note to 2.802% from 2.870% on Wednesday, its biggest one-day decline since September. 

Stocks were already trading lower after Federal Reserve chairman Jerome Powell brushed back concerns during his second address to Congress that inflation was accelerating so fast the central bank would have to aggressively respond.

Major indexes slid further after President Trump said he planned to introduce the new levies on steel and aluminium next week.

The tariffs will likely lead to higher good prices, further stoking investors’ fears that inflation is on the rise.

“All that is going to do is create higher prices and more inflation,” says Larry Peruzzi, a managing director at Mischler Financial Group. “It’s another factor to look into and be concerned about.”

Powell relaxed on wages
Earlier, Mr Powell appeared to ease investors’ concerns around inflation, saying he didn’t believe steady declines in unemployment and less slack in the labour market had led to a breakout in wage gains. He added he expected the labour market to strengthen further without adding to inflation.

The January jobs report had sparked investors’ inflation fears and led to the February selloff that saw the Dow and S&P 500 tumble into correction territory for the first time in two years. The February jobs report is due next week.

“Until we get a clearer picture of how high rates will go and how much wage growth we’ll have, we’ll have volatility,” says Sean O’Hara, president of Pacer ETFs. “No matter what Jerome Powell says, it’s not going to be easy for asset prices to continue going up.”

The labour market showed further signs of tightening with data showing new applications for unemployment benefits falling to their lowest level since 1969.

The Stoxx Europe 600 fell 1.3%, its worst day since the market rout in early February. France’s CAC 40 plunged 1.1%, Germany’s DAX 2.0% and the UK’s FTSE 100 0.8%

Italy’s FTSE MIB eased 0.7% ahead of the weekend’s general election.