(NEW YORK) — Stocks slumped at the open of trading on Monday after a downgrade of U.S. credit triggered a spike in debt yields that threatened to raise borrowing costs throughout the nation’s economy.
The Dow Jones Industrial Average dropped 295 points, or 0.7%, while the S&P 500 fell 0.9%. The tech-heavy Nasdaq plunged 1.2%.
Moody’s, a top ratings agency, cut the U.S. credit rating on Friday, dropping it one notch from the top rating of Aaa to a lower classification of Aa1.
The credit downgrade unleashed a selloff of U.S. debt, sending Treasury yields higher, which in turn raised the cost of U.S. borrowing and stoked investor fears about wider impact across the economy.
“This is a major symbolic move as Moody’s were the last of the major rating agencies to have the U.S. at the top rating,” a Deutsche Bank analyst said in a client note shared with ABC News.
The Treasury selloff sent long-term yields soaring above the level attained in the immediate aftermath of President Donald Trump’s “Liberation Day” tariffs. That spike in yields helped persuade Trump to suspend a major swathe of the tariffs, Trump later said.
The current spike in debt yields coincides with U.S. House Republicans’ push to pass a domestic policy bill that includes broad tax cuts. The nonpartisan Congressional Budget Office warned last month that the bill would raise the nation’s debt, which now stands at about $36 trillion.
(NEW YORK) — U.S. stocks teetered in early trading on Wednesday, posting shaky performance amid an escalating global trade war and concerns about a possible recession.
After some initial modest gains, the Dow Jones Industrial Average fell 330 points, or 0.8%, while the S&P 500 dropped 0.25%. The tech-heavy Nasdaq ticked up 0.25%.
Trading opened minutes after a fresh inflation report showed price increases had eased more than expected in February, the first full month under President Donald Trump.
Tit-for-tat tariffs continued to rattle global trade early Wednesday, however.
Trump’s 25% tariffs on all imported steel and aluminum products went into effect overnight. In response, Canada and the European Union slapped retaliatory duties on U.S. goods.
Tesla, the electric carmaker run by Elon Musk, soared about 6% in early trading on Wednesday. The gains came a day after Trump touted the company alongside Musk in an event at the White House.
Some economists say that while the U.S. tariffs could boost the local steel industry in the United States, they could also lead to higher prices for industries that purchase steel. Those higher prices may eventually reach consumers.
The U.S. relies heavily on imported aluminum and those costs are expected go up as well.
This is a developing story. Please check back for updates.
(NEW YORK) — Stocks fell on Monday ahead of the expected introduction of President Donald Trump’s sweeping tariffs on Wednesday, measures the president said will impact “all countries.”
The Dow Jones Industrial Average ticked down 10 points, or 0.03%, while the S&P 500 declined 0.7%. The tech-heavy Nasdaq plunged 1.5%.
Tesla, the electric carmaker led by billionaire Trump-advisor Elon Musk, dropped nearly 5%.
The downturn in U.S. markets followed a wave of selloffs worldwide.
Japan’s Nikkei index fell more than 4% and South Korea’s KOSPI slipped 3% after opening on Monday. In Europe, the British FTSE 100 fell by 1.18%, the German DAX index fell by 1.82% and France’s CAC 40 dropped by 1.76%.
Gold — a traditional safe-haven asset — reached a new record high of $3,128 per ounce.
Trump told reporters this weekend that his tariffs could affect “all the countries.”
“The tariffs will be far more generous than those countries were to us, meaning they will be kinder than those countries were to the United States of America,” he said.
“Over the decades, they ripped us off like no country has never been ripped off in history and we’re going to be much nicer than they were to us, but it’s substantial money for the country,” Trump said.
Auto tariffs of 25% are among those expected to come into effect on April 3. The measures will apply to imported passenger vehicles, including cars, SUVs, minivans, cargo vans and light trucks, according to a White House statement released last week.
Analysts widely expect the tariffs to raise prices for foreign-made cars, since importers will likely pass along a share of the tax burden to consumers.
Cars produced in the U.S. are also expected to undergo significant price hikes since manufacturers will bear higher costs for imported parts and face an uptick in demand as buyers seek out domestic alternatives, experts have told ABC News.
Trump dismissed concerns about auto tariffs this weekend. “The automakers are going to make a lot of money,” he said. “American automakers or international automakers, if you’re talking about them, are going to build in the United States.”
“The people that are going to make money are people that manufacture cars in the United States,” he continued. “Outside of the United States, that’s going to be up to them. I don’t care too much about that. But you have a lot of companies coming into the country to manufacture cars.”
ABC News’ Hannah Demissie contributed to this report.
(WASHINGTON) — Federal Reserve Chair Jerome Powell said Wednesday that he expects President Donald Trump’s tariffs policy to cause higher inflation and slower economic growth, complicating potential central bank efforts to ease the fallout.
“The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” Powell told the audience at the Economic Club of Chicago.
Powell’s remarks immediately sent stocks lower as investors digested the top central banker’s concern about the tariffs.
Within minutes, the Dow Jones Industrial Average fell 690 points, or 1.7%, more than tripling losses suffered over the course of the day before Powell’s comments. At the close of trading, the Dow dropped 1.7%.
The S&P 500 dropped 2.2% at market close, while the tech-heavy Nasdaq plunged 3%. Both indexes deepened losses suffered earlier in the day.
Stocks had fallen in early trading on Wednesday after chipmaker Nvidia disclosed it was recording a $5.5 billion charge in accordance with a new Trump administration restriction on exports to China.
Wednesday’s address marked Powell’s first public remarks since Trump last week paused his so-called “reciprocal tariffs” on most countries for 90 days. Stocks soared minutes after Trump’s announcement, recovering much of the losses suffered in the aftermath of the “Liberation Day” tariffs start a week earlier. It amounted to one of the most volatile weeks in the history of Wall Street.
“Markets are struggling with a lot of uncertainty and that means volatility,” Powell said on Wednesday. Still, he added, the volatility reflected the significance of the policy changes, rather than abnormal behavior in the markets.
“They’re functioning just about as you’d expect them to function,” Powell said.
At the same time Trump paused some tariffs last week, he also increased tariffs on China, bringing levies on Chinese goods to a cumulative level of 145%. In response, China hiked tariffs on U.S. goods to 125%, escalating a trade war between the world’s two largest economies.
Powell said earlier this month that he expected Trump’s tariff policy would hike prices and slow economic growth, while noting that key indicators “still show a solid economy.”
Policy changes implemented by the White House have contributed to a “highly uncertain outlook,” Powell said.
Last month, the Fed opted to hold interest rates steady, even as the central bank said it expected higher inflation and slower economic growth than it had forecast in December. The Fed will announce its next interest-rate decision on May 7.
Powell on Wednesday indicated that the Fed may approach interest rates with restraint as policymakers observe the economic effects of Trump’s tariffs.
“The U.S. economy is still in a solid position,” Powell said. “For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance.”
