On Thursday, the US stock market experienced a significant drop, with the Dow declining by up to 2,181 points and the Nasdaq by up to 7%. Investors were concerned about tariffs imposed on China, with the White House indicating a rate of 145%. The bond market also posed worries as Treasury yields remained high.
Following a remarkable increase on Wednesday, US stock indexes faced a sell-off on Thursday. The Dow Jones Industrial Average plunged by 2,181 points during the day but slightly recovered before the market closed. The S&P 500 tumbled by 6% initially, reducing losses to 3%, while the Nasdaq-100 dropped by 7% before recovering to around 4%.
Despite the temporary halt on reciprocal tariffs by President Trump for 90 days, investors remained fixated on the elevated tariff rate on Chinese goods. Tech stocks saw a significant decline around midday, with leading companies from the previous day experiencing sharp drops in their stock prices.
The White House confirmed on Thursday that the total tariff rate for China was 145%, higher than initially thought at 125%. Meanwhile, a 10% universal tariff was still in effect for most countries. Bond yields rose after earlier declines, with the 10-year Treasury yield climbing by around six basis points to 4.41%.
Various market indicators showed notable changes on Thursday: the VIX surged by 19.54%, the US dollar index decreased by 1.70%, WTI Crude Oil fell by 3.18%, and gold prices rose by 3.68%.
Despite the market turmoil and increased yields, President Trump decided to pause most tariffs. The sharp market decline followed a major increase in the S&P 500 the previous day, after Trump postponed reciprocal tariffs for most countries. However, concerns over the escalating trade tensions with China persisted.
An analysis by JPMorgan revealed that the effective tariff rate had actually increased on Wednesday despite the tariff delay, primarily due to the high tariffs imposed on China. The analysis estimated the average effective tariff rate to rise from 23% to 25%, assuming a 125% tariff on China, which was later corrected to be 145%.