US equity indexes experienced a significant downturn, with the S&P 500 entering correction territory amid warnings from President Donald Trump regarding potential large import duties on European alcohol products. The decline in producer prices also failed to bolster investor confidence. As of midday Thursday, the S&P 500 plummeted 1.6% to 5,507.1, marking a notable decline of over 10% from its mid-February peak.
The technology-heavy Nasdaq Composite, which began to show signs of a correction last week, fell 2.2% to 17,263.5. The Dow Jones Industrial Average also reflected market instability, trading 1.6% lower at 40,678.2. During this turbulent session, all sectors reported losses, with communications services, consumer discretionary, and real estate leading the downward trend.
The trade tensions escalated as President Trump threatened a staggering 200% tariff on imports of European alcoholic products in retaliation to the European Union's recently announced duties. The US administration's 25% global tariffs on steel and aluminum took effect the same day, spurring a reaction from the EU and instigating fears of a potential prolonged trade war. In the bond market, US Treasury yields decreased intraday, with the two-year rate dropping 5.9 basis points to 3.94%, while the 10-year yield saw a 5.2 basis points decline to 4.27%.
This shift in yields might reflect shifting investor sentiments amidst increasing uncertainty about the economic landscape. Gold futures managed to rise by 1.5% to $2,991.22, while silver futures increased by 1.7%, trading at $34.29. Conversely, West Texas Intermediate crude oil futures slipped by 1.7%, settling at $66.55 a barrel, indicating potential volatility in the energy sector as well. In economic indicators, the US producer price index remained stagnant in February compared to an upwardly adjusted increase of 0.6% in January.
This stagnation did not meet the 0.3% growth forecast from a Bloomberg survey, leading to concerns about inflation and pricing pressures. Year-over-year, overall producer prices increased by 3.2% last month, down from a 3.7% rise in January, which also fell short of the anticipated 3.3% rate projected by analysts.
Food prices surged by 1.7%, following a prior month rise of 1%, while energy prices faced a decline of 1.2% in February, adjusting for a 1.8% increase in January. Matthew Martin, Senior US Economist at Oxford Economics, remarked, "The details of the producer price report don't offer as encouraging a signal as the unchanged headline reading may suggest.
The two most volatile components, energy and trade services, were significant detractors, while food prices continue to rise significantly, and core goods recorded their largest monthly increase since January 2023—prior to the onset of most tariffs." Additionally, within labor statistics, the seasonally adjusted number of initial jobless claims fell by 2,000 to 220,000 for the week ending March 8.
Analysts had anticipated an increase to 225,000, highlighting unexpected resilience in the labor market. The previous week’s claims were adjusted upward by 1,000, correlating with a total of 222,000. The four-week moving average for jobless claims rose to 226,000, marking an increase of 1,500 from the previously revised average. In corporate news, Intel appointed semiconductor industry veteran Lip-Bu Tan as its new chief executive, effective March 18.
Tan, who previously led Cadence Design Systems, replaces interim co-CEOs David Zinsner and Michelle Johnston Holthaus. Following this announcement, Intel’s shares ascended by 14% intraday, standing out as the best performer on the S&P 500 and Nasdaq. Conversely, Adobe’s shares declined by 13% intraday, marking the poorest performance on both indices.
A note from Morgan Stanley indicated that a "clearer roadmap" is essential to alleviate investor "apathy" surrounding the stock, despite the software company exceeding Q1 earnings estimates. In conclusion, the confluence of heightened trade tensions, pressure on economic indicators, and fluctuating market performances reflects an unsettled landscape for investors, necessitating strategic attention amidst ongoing developments..