On Tuesday, stock futures experienced a significant decline as investors anticipated the imminent implementation of President Donald Trump's tariffs, which are set to take effect shortly after midnight on Wednesday. The S&P 500 index is perilously close to entering a bear market, facing mounting pressure due to the most severe selling spree since the onset of the COVID-19 pandemic in 2020.
Futures linked to the Dow Jones Industrial Average plummeted by 396 points, translating to a 1% drop. Additionally, Nasdaq-100 futures fell by 1.3%, and S&P 500 futures receded by 1.2%. The anxiety surrounding the forthcoming tariffs, announced late last Wednesday, has led to a four-day decline in stock prices. On Tuesday, the volatility persisted, with the S&P 500 momentarily rising over 4% before closing the day with a 1.6% loss. The 30-stock Dow initially surged by 3.9% at its peak but ultimately finished the trading day down by 0.8%. Currently, the broad market index is nearly 19% below its record high.
Over the past four days, the Dow has experienced a staggering loss of more than 4,500 points, while the S&P 500 has faced a notable 12% decline. The Nasdaq Composite has dropped more than 13% during this tumultuous period. Prominent tech company Apple has been particularly hard hit, as the iPhone manufacturer braces for increased costs due to the incoming tariffs on China. Apple shares have plummeted nearly 23% in just four days, marking the company's worst performance over such a timeframe since October 2000.
As the tariff rollout approaches, investors should prepare for potential volatility in the market. The upcoming duties include an expected 104% levy on imports from China, with customs set to begin collecting new tariffs on products from 86 different nations. Certain countries, including Canada, have indicated plans to retaliate, reaffirming their intention to implement 25% tariffs on U.S.-made vehicles, effective after midnight on Wednesday. This includes vehicles that do not comply with the United States-Mexico-Canada Agreement (USMCA), as well as non-Canadian and non-Mexican content within USMCA-compliant fully assembled vehicles imported from the U.S.
In a recent note, Piper Sandler analyst Andy Laperriere pointed out that while tariffs are likely to decrease over time, they will remain at historically high levels. Laperriere stated, "Our base case is that tariffs will drift lower than today's level but stay off the charts." He added that there is a higher likelihood for tariffs to increase in the short term, although minor deals could potentially emerge.
In addition to the impending tariff changes, investors are also keenly awaiting the release of the Federal Reserve's meeting minutes, scheduled for Wednesday. These minutes may provide insights into the central bank's future policy decisions and their potential impact on the market amidst the current volatility.
