Wall Street is in freefall again. The S&P 500 index has now entered its second correction this week, plunging by another 1.4% on Thursday and bringing its total losses to 10% from its February all-time high, and if this level holds, it meets the official definition of a market correction.
The Dow Jones Industrial Average is not far behind, crashing by 590 points (1.4%) in its fourth straight day of losses, slipping below 41,000 for the first time in months, but the Nasdaq Composite dropped even harder, losing 1.9% as Tesla, Apple, and other major tech stocks crumbled, according to data from CNBC.
Clearly, stock investors are pulling out fast, rattled by Donald Trump’s latest tariff threats, especially after he announced today a 200% tariff on all alcoholic imports from the European Union, responding to the EU’s 50% tariff on whisky. Trump posted on Truth Social that:
“The European Union, one of the most hostile and abusive taxing and tariffing authorities in the World, which was formed for the sole purpose of taking advantage of the United States, has just put a nasty 50% Tariff on Whisky. If this Tariff is not removed immediately, the U.S. will shortly place a 200% Tariff on all WINES, CHAMPAGNES, & ALCOHOLIC PRODUCTS COMING OUT OF FRANCE AND OTHER E.U. REPRESENTED COUNTRIES. This will be great for the Wine and Champagne businesses in the U.S.”
Hours later, he confirmed he wouldn’t be backing down on additional tariffs set to take effect on April 2, and financial markets reacted instantly, with traders dumping assets amid serious concerns of Trump escalating trade tensions.
The Dow heads for the worst week in over a year as investor panic grows
Generally, stocks have been on a downward spiral for three weeks, but this week’s losses are the worst yet. The S&P is down 4.2% so far, the Nasdaq has lost 4.8%, and the Dow has shed 4.6%, which is its worst week since March 2023.
The Nasdaq is now more than 14% below its previous record. Russell 2000, the small-cap index, has nearly hit bear market territory, now down 19% from its own ATH.
Jed Ellerbroek, a portfolio manager at Argent Capital Management, says there’s no clear end in sight. “These tariff wars are intensifying before they’re abating. It just adds to unpredictability and uncertainty, and that’s a negative for stocks, obviously.”
Scott Bessent, the Treasury Secretary, isn’t concerned. Speaking on CNBC’s “Squawk on the Street”, he dismissed the selloff. “I’m not concerned about a little bit of volatility over three weeks,” he said, implying the administration is prioritizing long-term economic stability over short-term market swings.
Despite the market turmoil, new inflation data actually looked promising. The February producer price index (PPI), which tracks production costs, was flat, missing expectations of a rise.
This follows a softer-than-expected consumer price index (CPI) report, hinting at slowing inflation. But the data wasn’t enough to calm traders.
Federal Reserve policies in focus as bearish sentiment surges
With inflation cooling, traders are watching the Federal Reserve for any hint of interest rate cuts. But Fed officials remain silent, offering no indication that lower rates are coming soon. Ellerbroek doesn’t see a shift happening just yet.
“I think the Fed would like for rates to be lower, and the economy would like for rates to be lower … but we’re not seeing body language from the Fed that’s saying they’re imminently going to get off the pause button here.”
Meanwhile, Wolfe Research reported that energy, housing, and transportation costs were the main drivers behind the February CPI decline.
The firm expects this pattern to continue, and Chris Senyek, its chief strategist, believes the data strengthens the case for at least two rate cuts in 2025.
The broader market sentiment is collapsing. A survey by the American Association of Individual Investors (AAII) showed that nearly 60% of retail investors are bearish on stock prices for the next six months—a record for the third straight week. Bearish sentiment rose to 59.2% this week, up from 57.1% last week, approaching a multi-year high of 60.6%.
AAII analysts said investor pessimism has never stayed above 57% for three weeks in a row. Historically, bearish sentiment has averaged only 31%, meaning today’s fear levels are nearly double the long-term norm. Optimism is at rock bottom.
Bullish sentiment is at 19.1%, down slightly from 19.3% last week, and far below the long-term average of 37.5%. This is the lowest reading since September 2022, marking the first time in history that optimism has stayed under 20% for three straight weeks.
Asked about other investors’ outlooks, 32% of AAII members said they believe others are too bearish, while 35% said sentiment is about right, and 24% think other investors are too bullish. The remaining investors were undecided.
Crypto struggles as Wolfe Research warns against buying in
Crypto markets are offering no safe haven. Bitcoin and altcoins have been falling, and Wolfe Research is advising investors to stay away. Rob Ginsberg, a senior analyst at Wolfe, says the charts don’t look good.
“We are seeing notable breakdowns across the board through key support levels. This is not the action of a group readying to rally.”
Ginsberg doesn’t see an immediate rebound, despite past crypto rallies. He warns that Bitcoin needs to climb above $91,000-$92,000 before any relief is possible.
“A move above $91-92k would allow for a sigh of relief in the near term. Our sense is that it would likely get sold, however. We simply don’t see an environment capable of supporting a meaningful turnaround in crypto. Outside of using BTC as a store of value, we see little reason to step into other coins while risk-off activity continues to prevail,” said Ginsberg on Thursday.
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