Topline
Stocks soared then came down to Earth on Tuesday as investors digested the latest developments in President Donald Trump’s “Liberation Day” trade war, with the markets failing to sustain a recovery from historically bad losses over the last week, as China, the world’s second-largest economy, threatens to “fight to the end” with the U.S. over the soaring import duties.
Key Facts
All three major U.S. stock indexes fell further Tuesday, as the Dow Jones Industrial Average slipped 0.8%, or 320 points, the S&P 500 declined 1.6% and the tech-heavy Nasdaq dropped 2.2%.
That was a major reversal from a morning surge, in which the Dow spiked more than 1,400 points and the S&P and Nasdaq jumped about 4% apiece, which would have been the indexes’ steepest respective gains since 2022.
Tuesday’s session mirrored more of a dead cat bounce, in which a financial asset in decline briefly rallies before falling further, rather than a sustained improvement in sentiment, with the lost steam coming after no tangible reversal of the White House’s tariff plans materialized.
The Dow is down 12%, or 5,040 points, since Trump’s wide sweeping tariff announcement last Wednesday, and the S&P and Nasdaq have lost 13% and 14% over the four trading session span, respectively.
Monday’s trading session was similarly rocky, as the S&P bounced between what was as much as a 3.4% daily gain and a 4.5% daily loss before closing with a 0.2% decline.
The S&P narrowly dodged closing in a 20% bear market, ending 18.9% below its Feb. 19 all-time high.
Big Number
7,370 points. That’s how much the Dow has dropped from its December closing record through Tuesday, a 16% dive.
Surprising Fact
If the S&P does slip into a 20% bear market, this would be the third-fastest such drawdown ever, trailing only 1929’s Great Depression crash and 2020’s brief COVID-19 crash, according to Bespoke Investment Group.
Why Were Stocks Up This Morning?
The morning recovery came as Wall Street thirsted for any signs the Trump administration would leave the door open for negotiations on the tariffs viewed by many to be devastating to corporate earnings. Those signs were led by Treasury Secretary Scott Bessent’s comments Tuesday to CNBC’s Squawk Box that he believes “we can end up with some good deals” if other countries come to the table.
Trump-Heralded Bond Rally Also Lost Steam
Trump has already lost one development he took a victory lap on last week. Yields for 10-year U.S. Treasury notes, the benchmark to which many borrowing rates are tied to, climbed about 10 basis points to nearly 4.3%, higher than they stood prior to Liberation Day, up nearly 40 basis points from their Friday low. Higher yields indicate less valuable bonds as investors sour on the idea of holding U.S. government debt, and the rising 10-year signals borrowing costs are not coming down. The 10-year is almost exactly flat from where it stood at Election Day.
What To Watch For
Trump’s country-by-country tariffs, beyond the 10% universal duties, are scheduled to go into effect at 12:01 a.m. EDT on Wednesday. The White House called a report it was considering a pause, similar to delays on Canada and Mexico tariffs earlier in Trump’s second term, “fake news,” though billionaire Trump donor Bill Ackman officially lobbied for a 30-day or longer pause Tuesday.
China And Scott Bessent War Over Who Is Making ‘mistake’
Trump said Monday he would slap an additional 50% tariff on Chinese imports over the country’s retaliatory tariffs, which the Chinese Commerce Ministry called a “mistake on top of a mistake” that “China will fight to the end.” Bessent, the U.S.’ top economic official, said Tuesday the Chinese response was a “big mistake” and it’s a “losing hand” for the Asian power to engage in a tariff war.