Wall Street stumbled in early trading on Thursday, as a rally prompted by President Trump pausing tariffs on dozens of countries began to fade.
The S&P 500 opened about 2 percent lower, reversing some of its gains on Wednesday, when the benchmark index recorded its biggest one-day surge since 2008.
The technology-heavy Nasdaq Composite index dropped nearly 3 percent on Thursday, with shares in Apple, Nvidia and other tech giants falling.
Mr. Trump said on Wednesday that he would pause so-called reciprocal tariffs for 90 days because markets were getting “yippy,” with a simultaneous rout in bonds, stocks and the dollar.
Although countries won’t immediately face those additional tariffs, they will still be subject to a 10 percent levy. Sector-specific tariffs, including a 25 percent levy on cars — a particular sore point for big auto exporters like Japan, South Korea and Germany — are still in place. And Mr. Trump did not walk back tariffs on China, which now exceed 100 percent.
The pause on some tariffs by Mr. Trump sparked the biggest one-day rally of the S&P 500 since October 2008, when stocks soared as investors anticipated central bank rate cuts in the wake of the global financial crisis.
Stock indexes in Europe and Asia jumped on Thursday, catching up with the U.S. rally.
Analysts warned that U.S. tariffs remained much higher than before Mr. Trump took office and that trade policy was unpredictable.
“Despite the good news, policy uncertainty remains elevated and will act as a drag on the U.S. economy,” James Rossiter, the head of global macro strategy at TD Securities, wrote in a note. “Firms will struggle to plan.”
On Thursday, the bond market continued to reflect investors’ caution. The yield on 10-year U.S. Treasuries dipped to 4.3 percent as the sell-off eased, but yields, which rise when bond prices fall, were still elevated relative to the end of last week, when the 10-year yield was just below 4 percent.
An index of the U.S. dollar’s value against other major currencies fell about 1 percent.
There were other signs of concern about the economic ramifications of the intensifying trade war between the United States and China. Oil prices fell about 3 percent, with Brent crude, the international benchmark, trading around $63.50 a barrel. Gold prices rose more than 1 percent, to $3,120 per ounce.
In a note, Bob Savage, a strategist at BNY Mellon, described the recent moves in stocks as “a dead cat bounce.”
It is a “hard-to-impossible environment” for investors, he wrote, “so the predominant attitude is wait and see and to hold cash — all of which makes for an uncertain relief rally.”
In Asia, on Thursday benchmark indexes rose more than 9 percent in Taiwan and Japan and 6 percent in South Korea.
In Europe, The Stoxx Europe 600 index jumped more than 5 percent. The markets in Germany and France each gained more than 5 percent.
There were few signs of de-escalation in the trade spat with China. Washington and Beijing have traded multiple rounds of tariffs, pushing the cost of their trade with one another to extraordinary levels. China leveled the latest salvo on Wednesday, bringing its across-the-board levies on American imports to 84 percent.
President Trump said on Wednesday that he did not think he would need to raise tariffs on China higher than 125 percent and that he expected Xi Jinping, China’s leader, to reach out about a deal. “I can’t imagine it. I don’t think we’ll have to do it more,” he said of additional tariffs on China. “No, I don’t see that.”
In trading on Thursday, stocks listed in Hong Kong gained around 2 percent, while those listed in Shanghai gained about 1 percent.
Takahide Kiuchi, executive economist at Nomura Research Institute in Tokyo, said that Mr. Trump’s latest moves show a shift in focus from reducing America’s trade deficits to gearing up for a trade war with China.
That means “risks have not been all that significantly reduced” for many countries like Japan and South Korea, which count China and the United States as their top trade partners, Mr. Kiuchi said.
The Chinese government has taken steps to stabilize its markets. State-owned companies on Tuesday announced they were buying back some shares, a move that typically helps push stock prices higher. On Thursday, an influential state media outlet published a commentary saying it was a good time for the central bank to lower interest rates and take other steps that would support the economy.
Over the past week, Mr. Trump’s trade broadsides have led to extremely volatile markets and threatened to upend global trade. Even after the rally on Wednesday, the S&P 500 remains roughly 12 percent below its February peak. It has been the index’s worst start to a presidential term since the dot-com bubble burst at the start of 2001.
In Asia, this year stock benchmarks have dropped around 12 percent in Japan, and more than 16 percent in Taiwan. South Korea’s Kospi index has remained roughly flat.
Ryan Young, a senior economist with the Competitive Enterprise Institute, said Mr. Trump’s pivot on tariffs was a relief. But he remains concerned that uncertainty about future policies will continue to paralyze long-term investment. The administration’s tariff actions “have already done a lot of damage, and this pause does not undo it,” Mr. Young said. “Markets want stability.”
Berry Wang contributed research from Hong Kong.
Content Source: www.nytimes.com