NEW YORK – U.S. stocks dropped after a second day of stunning reversals. The S&P 500 fell 1.6% Tuesday after wiping out an early gain of 4.1%, which had it on track for its best day in years. That brought the index nearly 19% below its record set in February.
The Dow Jones Industrial Average dropped 320 points after giving up an earlier surge of 1,460, while the Nasdaq composite lost 2.1%.
Uncertainty is still high about what President Donald Trump will do with his trade war. The latest set of tariffs, including a massive 104% levy on Chinese imports, are scheduled to kick in after midnight.
The shocking swings followed rallies for stocks globally earlier in the day, with indexes up 6% in Tokyo, 2.5% in Paris and 1.6% in Shanghai. But even after those jumps, analysts had been warning to expect more swings up and down for financial markets not just in the days ahead but also the hours.
The big question remains centered on how long Trump will keep his stiff tariffs on other countries, which would raise prices for U.S. shoppers and slow the economy. If they last a long time, economists and investors expect them to cause a recession. But if Trump lowers them through negotiations relatively quickly, the worst-case scenario can be avoided.
Hope still remains on Wall Street that negotiations may be possible, which helped drive the morning’s rally. Trump said Tuesday that a conversation with South Korea’s acting president helped them reach the “confines and probability of a great DEAL for both countries.”
“Their top TEAM is on a plane heading to the U.S., and things are looking good,” Trump said on his Truth Social platform. “We are likewise dealing with many other countries, all of whom want to make a deal with the United States.”
Japanese stocks led global markets higher after the country’s prime minister, Shigeru Ishiba, appointed his trade negotiator for talks with the United States. It was based on an agreement between Ishiba and Trump, Japanese officials said.
But investors should still remain cautious, said Sameer Samana, a senior global market strategist for Wells Fargo Investment Institute. He pointed to how “the key countries continue to escalate, rather than de-escalate.”
China said it will “fight to the end” and warned of countermeasures after Trump threatened on Monday to raise his tariffs even further on the world’s second-largest economy.
That led White House press secretary Karoline Leavitt to say Trump’s threats of even higher tariffs on China will become reality after midnight, when imports from China will be taxed at a stunning 104% rate.
That would coincide with Trump’s latest set of broad tariffs, which are scheduled to kick in at 12:01 a.m. And Trump has made clear that he does not intend to have any exemptions or exclusions in the tariffs, according to the country’s top trade negotiator, Jamieson Greer.
The U.S. trade representative also said in testimony before a Senate committee that roughly 50 countries have already been in contact, and he’s told them: “If you have a better idea to achieve reciprocity and to get our trade deficit down, we want to talk with you, we want to negotiate with you.”
