Wall Street sell-off spirals after Trump tariff announcement

Wall Street's sell-off is spiralling following US President Donald Trump's latest escalation in his trade war, briefly pulling the US stock market 10 per cent below its record set just a few weeks ago.

The S&P 500 was down 1.4 per cent in afternoon trading after Trump said he would raise tariffs on steel and aluminum coming from Canada, doubling their planned increase to 50 per cent.

The president said it was a response to moves a Canadian province made after Trump began threatening tariffs on one of the United States' most important trading partners.

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The Dow Jones Industrial Average was down 678 points, or 1.6 per cent, as of 1.40pm Tuesday Eastern time (4.40am Wednesday AEDT), and the Nasdaq composite was one per cent lower.

The S&P 500 was sitting at the edge of what Wall Street calls a "correction," where it falls 10 per cent, and was sitting within 0.1 percentage points of the mark.

Such head-spinning moves are becoming routine following a scary ride for investors where the S&P 500 has swung by at least one per cent, up or down, seven times in the last eight days. The heaves back and forth are a result of Wall Street's uncertainty about how much pain Trump is willing for the economy to endure through tariffs and other policies in order to remake the country and world.

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"The only thing that makes sense is for Canada to become our cherished Fifty First State," Trump said, while announcing his latest upping of the ante in his trade war. "This would make all Tariffs, and everything else, totally disappear."

Tuesday's drops also followed more warning signals flashing about the economy as Trump's on-and-off-again rollout of tariffs creates confusion and pessimism for US households and businesses.

Such tariffs can hurt the economy directly by raising prices for US consumers and gumming up global trade. But even if they end up being milder than feared, all the whipsaw moves could still create enough uncertainty on their own to drive US companies and consumers into an economy-freezing paralysis.

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Delta Air Lines said late Monday that it's already seeing a change in confidence among customers, which is affecting demand for close-in bookings for its flights. That pushed the airline to roughly halve its forecast for revenue growth in the first three months of 2025, down to a range of three to four per cent, from a range of seven to nine per cent.

Delta's stock lost 8.3 per cent.

Southwest Airlines also cut its forecast for an important underlying revenue trend, and it pointed specifically to less government travel, among other reasons, including wildfires in California and "softness in bookings and demand trends as the macro environment has weakened."

Its stock nevertheless rallied 8.5 per cent, though, after the airline said it would soon begin charging some passengers to check bags and announced changes to encourage its most loyal customers.

Oracle dropped five per cent after the technology giant reported profit and revenue for the latest quarter that fell short of analysts' expectations.

Helping to keep the market's losses in check were several Big Tech stocks, which steadied a bit after getting walloped in recent months. Elon Musk's Tesla rose 1.6 per cent, for example, after Trump said he would buy a Tesla in a show of support for "Elon's 'baby.'"

Tesla's sales and brand have been under pressure as Musk has led efforts in Washington to cut spending by the federal government. Tesla's stock is down 44.1 per cent for the young year so far.

Other Big Tech superstars, which had led the market to record after record in recent years, also held a bit firmer. Nvidia added 1.3 per cent to trim its loss for the year so far to 19.3 per cent. It's struggled as the market's sell-off has particularly hit stocks seen as getting too expensive in Wall Street's frenzy around artificial-intelligence technology.

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A handful of such superstars was the main reason the S&P 500 set a record as recently as February 19. Just seven of them accounted for more than half of the S&P 500 total's return last year: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla.

Strategists at Citi say they "doubt that the AI bubble is already fully played out" and that such companies could lead the US stock market back to its years-long position of beating other markets around the world. But "that is for the long term, not for the next few months," the strategists wrote in a report, saying "US exceptionalism is at least pausing."

In stock markets abroad, which have mostly been beating the United States so far this year, indexes fell across much of Europe and Asia.

Stocks rose 0.4 per cent in Shanghai and were nearly unchanged in Hong Kong as China's national congress wrapped up its annual session with some measures to help boost the slowing economy.

In the bond market, Treasury yields held a bit steadier after tumbling in recent months on worries about the US economy. The yield on the 10-year Treasury rose to 4.23 per cent from 4.22 per cent late Monday. In January, it was nearing 4.8 per cent.

A report released Tuesday morning showed that US employers were advertising 7.7 million job openings at the end of January, exactly as economists expected. It's the latest signal that the US job market remains relatively solid overall, for now at least, after the economy closed last year running at a healthy pace.

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