US benchmark equity indexes experienced a notable decline intraday as President Donald Trump issued a stark warning about imposing a 200% tariff on all alcohol products exported from the European Union. This announcement has set the stage for a potential trade escalation that could affect multiple sectors of the economy. The Nasdaq Composite index fell by 2.2% to 17,253.5 at midday Thursday.
Alongside, the Dow Jones Industrial Average and the S&P 500 exhibited similar downward trajectories, declining by 1.6% each to 40,705.9 and 5,508.7, respectively. Across the board, all sectors faced negative pressure, with consumer discretionary and communication services taking the brunt of the losses. In a direct response to the EU’s tariff on US whiskey, Trump stated that if the European Union does not retract this tariff, the US will retaliate with a hefty 200% tax on European alcohol imports, further inflaming trade tensions between the two economic powerhouses.
Canada and the EU have already moved to implement retaliatory tariffs against US goods, exacerbating the situation. On the fixed income front, US Treasury yields saw a decrease with the two-year rate dropping by 5.5 basis points to 3.94%, while the 10-year rate slipped 4.6 basis points to 4.27%. Such shifts in yield reflect market apprehensions regarding future economic conditions and have implications for investor behavior. In the realm of economic metrics, the latest data from the Bureau of Labor Statistics revealed that US producer prices remained unchanged for the preceding month, signaling a sequential slowdown as wholesale costs in services dipped.
Additionally, recent government reports indicated a greater-than-expected easing in consumer inflation rates for February. Stifel analysts remarked, "While a welcome directional adjustment, after several months of escalating price pressures, one month's reprieve does little to instill confidence of a sustained disinflationary trend.
Large monthly gains in the report suggest there may be additional price pressures ahead." Meanwhile, weekly unemployment insurance applications in the United States dropped unexpectedly, with continuing claims also declining, suggesting a potential strengthening of the labor market despite the overarching economic concerns. Turning to individual company performances, shares of Adobe ($ADBE) suffered a significant drop of 13%, marking it as the poorest performer on the S&P 500 for the day.
The software giant reported disappointing fiscal first-quarter results that raised concerns about a 'weakness' in net-new digital media annualized recurring revenue and delivered a cautious outlook for the upcoming quarters, as noted by Oppenheimer analysts. Conversely, Intel ($INTC) shares surged nearly 14% during intraday trading, establishing it as the top gainer on the S&P 500.
The rally followed the appointment of Lip-Bu Tan as the new chief executive, a move expected to invigorate the semiconductor giant’s strategic direction effective March 18. Dollar General's ($DG.US) performance reflected mixed results; although its fiscal fourth-quarter earnings fell short of analyst expectations, it surpassed sales estimates, resulting in a 4.1% increase in its stock price, highlighting its resilience amidst economic uncertainties and making it one of the better-performing entities within the S&P 500 index. In commodities, West Texas Intermediate crude oil prices dipped 1.7% to $66.51 a barrel intraday.
The International Energy Agency (IEA) projected that global oil supply is poised to overshadow demand this year, with trade tensions casting a shadow over the forecast. The IEA commented, "The macroeconomic conditions that shape our oil demand projections have worsened over the past month as trade tensions escalated between the US and other nations.
New US tariffs, combined with escalating retaliatory measures, have tilted macro risks to the downside." On a brighter note, gold prices increased by 1.5% to $2,990.30 per troy ounce, while silver followed suit with a 1.6% gain, reaching $34.28 per ounce, as investors sought safe havens amidst the growing market volatility..