A screen shows financial news while traders on the floor work at the New York Stock Exchange in New York, Thursday 3 April 2025. The S&P 500 fell by 4.8%, with the Dow Jones with 1,679 points and the Nasdaq loses 6%. | Photocredit: Seth Wenig
Wall Street shivered, and a level of shock unseen since Covid’s outbreak on Thursday through financial markets tore about worries about the damage that President Donald Trump’s latest rates could take on economies in continents, including his.
The S&P 500 fell 4.8 percent, more than in large markets in Asia and Europe, for the worst day since the Pandemie crashed the economy in 2020. The industrial average of Dow Jones fell 1,679 points, or 4%, and the Nasdaq composite tumbled 6 percent.
Little was spared on the financial markets, while fear flared up about potentially toxic mix of weakening economic growth and higher inflation that can cause rates.
Everything, from crude oil to big tech shares to the value of the US dollar against other currencies, fell. Even gold, who recently became recently when investors sought a little safer to own, drew lower. Some of the worst hits threw smaller American companies, and the Russell 2000 index of smaller shares fell by 6.6 percent to draw more than 20 percent under the record.
Investors worldwide knew that Trump would announce a radical set of rates at the end of Wednesday, and the fears around it had already drawn the most important health measure of Wall Street, the S&P 500 index, 10 percent below the all time. But Trump still managed to surprise them with ‘the sausage case scenario for rates’, said Mary Ann Bartels, Chief Investment Officer at Sanctuary Wealth.
Trump announced a minimum rate of 10 percent on imports, with the tax rate much higher on products from certain countries such as China and those of the European Union. It is “plausible” the rates completely, which would compete in about a century unseen, the US economic growth could downline this year by 2 percentage points and that inflation could increase almost 5 percent, according to UBS.
Such a hit would be so big that “someone’s rational mind makes them the opportunity that they will stay so low,” said Bhanu Baweja and other strategists at UBS.
Wall Street was long convinced that Trump would only use rates as a tool for negotiations with other countries, rather than as a long -term policy. But Wednesday’s announcement can suggest that Trump sees the rates more if helps to solve an ideological purpose than as an opening bet in a poker game. Trump spoke on Wednesday about wresting production channels back to the United States, a process that could last for years.
If Trump follows his rates, the stock prices may have to fall much more than 10 percent of all time to reflect the recession that could follow, together with the hit for profit that American companies could take. The S&P 500 has now fallen by 11.8 percent compared to its record in February.
“Markets can actually be under the reaction, especially if these rates prove to be final, given the potential knock-on effects for global consumption and trade,” said Sean Sun, portfolio manager at Thornburg Investment Management, although he sees Trump’s announcement on Wednesday as an opening point for policy.
Trump offered a cheerful reaction after he was asked about the drop of the market when he left the White House to fly to his golf club in Florida on Thursday.
“I think things are going very well,” he said. “We have surgery, such as when a patient is operated on and it is a big thing. I said this would be exactly as it is.” A wildcard is that the Federal Reserve could lower interest rates to support the economy. That is what it had done at the end of last year before he paused in 2025. Lower interest rates help by making it easier for American companies and households to borrow and publish.
The proceeds on Treasurys were partly about increasing expectations for upcoming cuts, together with general fear of the health of the American economy. The return on the 10-year-old treasury fell to 4.04% of 4.20 percent at the end of Wednesday and about 4.80 percent in January. That is a huge step for the bond market.
However, the Fed can have less freedom to move than he would like. Although lower rates can visit the economy, they can also push up on inflation. And worries have already deteriorated there because of rates, with our households in particular making a strong increase in their accounts.
The American economy is of course still growing. A report on Thursday said that fewer American employees applied for unemployment benefits last week. Economist expected to see an increase in unemployment, and a relatively solid labor market has been the spider that kept the economy out of the recession.
A separate report said that the activity for American transport, finance and other companies in the service sector grew last month. But the growth was weaker than expected, and companies gave a mixed picture of how they see the circumstances.
Concerns about a potentially stagnant economy and high inflation have made all kinds of shares, which led to drops for four of the five that form the S&P 500.
Best Buy fell 17.8 percent because the electronics it sells are made all over the world. United Airlines lost 15.6 percent because customers are worried about the global economy may not be so much flying for business or feel comfortable enough to take holidays. Target tumbled 10.9 percent in the midst of ensuring that his customers are still pressed by high inflation, perhaps even more stress.
All together, the S&P 500 fell. 274.45 points up to 5,396.52 The industrial average of Dow Jones fell 1,679.39 to 40,545.93 and the Nasdaq composite tumbled 1,050.44 to 16,550.61.
Indexes fell sharply on stock markets abroad. The CAC 40 of France fell by 3.3 percent and the Dax Dax lost 3 percent in Europe.
The Japanese Nikkei 225 sank 2.8 percent, Hong Kong’s Hang Seng lost 1.5 percent and Kospi in South Korea dropped by 0.8 percent.
Published on April 4, 2025
