On Wednesday, the New York Stock Exchange reversed course and plunged into negative territory.
After four days of gains, investor sentiment rapidly shifted, triggering a wave of selling.
The White House’s announcement that Trump would sign an executive order on automotive tariffs froze investor sentiment.
The market, already under pressure from profit-taking, tumbled further when news of Trump’s auto tariff plan broke.
Market collapse due to external factors
The New York Stock Exchange declined across the board.
The three major indices, which had been on a three-day winning streak following Trump’s March 21 statement about applying reciprocal tariffs “flexibly,” abruptly changed course and fell.
Tech stocks bore the brunt of the selling pressure.
The tech-heavy Nasdaq plummeted 372.84 points (2.04%) to finish at 17,899.01.
The S&P 500, which reflects broader market conditions but is heavily influenced by tech stocks due to the sector’s recent outperformance, also fell over 1%, closing down 64.45 points (1.12%) at 5,712.20.
The Dow Jones Industrial Average, comprising 30 blue-chip stocks, saw a more modest decline. It ended the day 132.71 points (0.31%) lower at 42,454.79.
The index’s decline was relatively limited by strong performances from a few stocks, including McDonald’s, which gained 2.17%, and Procter & Gamble, which surged 2.29%.
The CBOE Volatility Index (VIX), often referred to as Wall Street’s “fear index,” snapped its five-day losing streak that had started on March 19 and spiked 1.18 points (6.88%) to 18.33.
Tesla takes a hit
Tesla’s stock price plunged from $16.08 (5.58%) to $272.06 in response to Trump’s proposed auto tariffs.
While some analysts argue that Tesla’s global production facilities in Europe, the U.S., and Asia could mitigate the tariff impact, the company’s reliance on parts from Mexico for its U.S. operations remains a concern.
The sell-off was exacerbated by profit-taking following the stock’s impressive 28% rally over the previous five sessions.
Investors also rushed to unload shares ahead of Tesla’s first-quarter delivery report on April 2, anticipating potential volatility. The stock’s key resistance level of $285, which had been the 200-day moving average, crumbled under the selling pressure.
Nvidia faces a double whammy
Nvidia, a leading AI chip manufacturer, faced double troubles.
The U.S. Department of Commerce blacklisted approximately 80 companies, including over 50 from China, further restricting exports of advanced semiconductors from Nvidia and AMD to China. As a result, Nvidia’s stock tumbled.
Adding to the pressure, the Financial Times reported that Chinese authorities are pressuring major tech firms to avoid using Nvidia’s H20 chips, which are designed specifically for the Chinese market.
However, some analysts argue that the impact of the Chinese market on Nvidia’s business may be overstated.
Bernstein’s Stacy Rasgon told MarketWatch that China accounts for only about 13% of Nvidia’s total revenue and an even smaller 5% of its earnings per share (EPS).
Nevertheless, investor unease remained.
Nvidia’s stock price dropped $6.93 (5.74%) to close at $113.76.
The company’s shares are now down 15% year-to-date.
All major tech stocks suffered significant losses on Tuesday.
Wall Street slashes S&P 500 target
Wall Street’s outlook for the New York stock market grew increasingly pessimistic.
British bank Barclays cut its S&P 500 target from 6,600 to 5,900.
Barclays market strategist Venu Krishna cited the potential decline of U.S. corporate profits due to Trump’s tariffs as the primary reason for the downgrade.
Krishna also noted that the tariffs negatively impact inflation and growth expectations for consumers and businesses.
