The major U.S. index futures on the Dow Jones, S&P and Nasdaq are currently pointing to a sharply lower open on Monday, with stocks likely to extend the sell-off seen over the two previous sessions.
Concerns about the impact of President Donald Trump’s new tariffs and retaliatory moves by U.S. trade partners are likely to continue to weigh on Wall Street.
In his closely watched annual letter to shareholders, JPMorganChase (NYSE:JPM) CEO Jamie Dimon warned the tariffs will likely lead to higher inflation and slow down growth.
Continued weakness on Wall Street could drag the S&P 500 into bear market territory, with the index potentially slumping more than 20 percent from its record closing high in February.
Responding to the nosedive on Wall Street in remarks to reporters on Sunday, Trump said, “I don’t want anything to go down, but sometimes you have to take medicine to fix something.”
He added, “We have a trillion-dollar trade deficit with China, hundreds of billions of dollars a year we lose with China. And unless we solve that problem, I’m not going to make a deal.”
White House National Economic Council Director Kevin Hassett also defended the tariffs in an appearance on ABC’s “This Week” and claimed more than 50 countries have reached out to Trump to begin negotiations.
“Investors will be sitting on the edge of their seat waiting to see if anyone strikes a deal with Trump,” said Russ Mould, investment director at AJ Bell. “Tariff-related deals are likely to be high up the list of catalysts to drive a recovery in markets, and the next few weeks are going to be crucial in terms of getting a better idea of the new lay of the land.”
“Negotiations may not produce rapid results so there could be prolonged uncertainty and that spells heightened market volatility,” he added. “Trump will drive a hard bargain and won’t back down or soften the blow unless the US gets something big in return.”
Extending the nosedive seen over the course of Thursday’s session, stocks showed another substantial move to the downside during trading on Friday. With the continued sell-off, the Nasdaq and the S&P 500 plunged to their lowest closing levels in eleven months.
The major averages ended the session just off their worst levels of the day. The S&P 500 plummeted 322.44 points or 6.0 percent to 5,074.08, the Nasdaq dove 962.82 points or 5.8 percent to 15,587.79 and the Dow tumbled 2,231.07 points or 5.5 percent to 38,314.86.
The tech-heavy Nasdaq is now down more than 20 percent from its record high in December, which is considered a bear market in Wall Street terminology.
The extended nosedive on Wall Street came amid ongoing concerns about a global trade war after China announced retaliatory tariffs on U.S. goods in reaction to President Donald Trump’s new levies.
China’s finance ministry announced a 34 percent tariff will be imposed on all imported goods originating from the U.S. beginning on April 10th.
The new tariff matches the “reciprocal tariff” Trump plans to impose on China, although the country will face a 54 percent effective rate when the new levies are combined with existing duties.
The ministry called Trump’s tariff plan a “typical unilateral bullying practice” that is “inconsistent with international trade rules.”
“China urges the United States to immediately cancel its unilateral tariff measures and resolve trade differences through consultation in an equal, respectful and mutually beneficial manner,” the ministry said, according to a Google translation.
Responding to the news in a post on Truth Social, Trump argued China “played it wrong” and “panicked,” calling the move “the one thing they cannot afford to do.”
Canada and the European Union are also purportedly preparing countermeasures, leading to concerns about a trade war that could fuel inflation and damage the global economy.
Federal Reserve Chair Jerome Powell said in remarks at a business journalist conference that it will very difficult to assess the likely economic effects of the higher tariffs until there is greater certainty about the details.
However, Powell said it is becoming clear that the tariff increases will be significantly larger than expected and the same is likely to be true of the economic effects, which will include higher inflation and slower growth.
Citing the highly uncertain outlook due in part to Trump’s new tariffs, Powell indicated the central bank will wait for greater clarity before considering any adjustments to interest rates.
Meanwhile, traders largely shrugged off a typically closely watched Labor Department report showing employment in the U.S. surged by much more than expected in the month of March.
With the crude of oil plummeting to its lowest levels in over three years, energy stocks saw substantial weakness on the day, dragging the Philadelphia Oil Service Index and the NYSE Arca Oil Index down by 11.2 percent and 8.7 percent, respectively.
Gold stocks also moved sharply lower amid a nosedive by the price of the precious metal, with the NYSE Arca Gold Bugs Index plunging by 9.5 percent.
Significant weakness was also visible among semiconductor stocks, as reflected by the 7.6 percent slump by the Philadelphia Semiconductor Index.
Natural gas, financial and computer hardware also saw considerable weakness amid another broad-based sell-off on Wall Street.