July 7 (Reuters) – Wall Street’s major indexes closed sharply lower on Monday, after U.S. President Donald Trump announced hefty tariffs against Japan, South Korea and other trading partners while Tesla shares sank after CEO Elon Musk said he was forming a new U.S. political party.
Indexes added to losses after Trump announced the tariff rates against Japanese and South Korean imports, due to take effect on August 1. Stocks wobbled further in the late afternoon when he announced hefty tariffs on Malaysia, Kazakhstan, South Africa, Laos and Myanmar.
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Last week, both the Nasdaq (.IXIC)
, opens new tab and the S&P 500 (.SPX)
, opens new tab ended three sessions with record high closes. The latest record finishes came on Thursday after a robust jobs report.
“Markets had been telling us that peak tariff risk is behind us, but to have tariffs back in the forefront is causing some skittishness,” said Emily Roland, co-chief investment strategist at Manulife John Hancock Investments in Boston. “Investors were getting to that period of ebullience in markets and we’re taking a little step back from that.”
But investors likely have some hopes the announcements are not permanent, she said: “That’s the pattern we’ve been in, announcing punitive tariffs and then dialing that back a little bit. That could certainly be the next phase of this back and forth negotiation.”
The Dow Jones Industrial Average (.DJI)
, opens new tab fell 422.17 points, or 0.94%, to 44,406.36, the S&P 500 (.SPX)
, opens new tab lost 49.37 points, or 0.79%, to 6,229.98 and the Nasdaq Composite (.IXIC)
, opens new tab lost 188.59 points, or 0.91%, to 20,412.52.
The S&P 500’s biggest drag came from shares of electric vehicle maker Tesla (TSLA.O)
, opens new tab, which dived 6.8%, after CEO Musk announced formation of a new political party named the “America Party”, further escalating his feud with Trump. It was Tesla’s biggest daily slide since June 5, and its lowest closing level since that session.
Investors also awaited other U.S. trade announcements after Trump said on Sunday that the U.S. was on the cusp of several deals and would notify other countries of higher tariffs by July 9, with new duties to take effect on August 1.
On Monday, Trump threatened an extra 10% tariff on countries aligning themselves with the “Anti-American policies” of the BRICS group of Brazil, Russia, India, China and South Africa.
In early April, stock indexes saw dramatic volatility after Trump unveiled a base tariff rate of 10% on most countries and additional duties ranging up to 50% on April 2 and then announced a 90-day pause days later.
In early April, the Nasdaq (.IXIC)
, opens new tab confirmed a bear market or a 20% drop from its recent record, while the S&P 500 had narrowly averted a bear. Both indexes had returned to record levels by late June.
On Monday, 9 of the S&P 500’s 11 major industry sectors lost ground. The biggest decliners were consumer discretionary (.SPLRCD)
, opens new tab off 1.25% and energy (.SPNY)
, opens new tab down 1.04%. The only gainers were defensive sectors with utilities (.SPLRCU)
, opens new tab adding 0.17% and consumer staples (.SPLRCS)
, opens new tab, edging up 0.11%.
Shares of WNS Holdings (WNS.N)
, opens new tab rallied 14.3% after the French IT services firm Capgemini (CAPP.PA)
, opens new tab agreed to buy the outsourcing firm for $3.3 billion in cash.
Trump’s tariff policies have stoked inflation worries, further complicating the Federal Reserve’s path to lower rates. Minutes of the Fed’s June meeting, scheduled for release on Wednesday, should offer more clues on the policy outlook.
Traders are betting on a roughly 95% probability that rates will remain unchanged in July while the odds for a September cut are close to 60%, according to CME Group’s FedWatch tool
Another area of investor focus is U.S. tax-cut and spending plans, signed into law by Trump late last week. These are expected to swell the national deficit by over $3 trillion in the next decade.
On U.S. exchanges 16.50 billion shares changed hands on Monday compared with the 18.18 billion average for the last 20 trading sessions.
Declining issues outnumbered advancers by a 3.44-to-1 ratio on the NYSE where there were 209 new highs and 32 new lows.
On the Nasdaq, 1,226 stocks rose and 3,354 fell as declining issues outnumbered advancers by a 2.74-to-1 ratio. The S&P 500 posted 25 new 52-week highs and 3 new lows while the Nasdaq Composite recorded 103 new highs and 54 new lows.
Reporting by Sinéad Carew in New York, Pranav Kashyap and Nikhil Sharma in Bengaluru; Editing by Maju Samuel and David Gregorio
Our Standards: The Thomson Reuters Trust Principles.
