Unlock the White House Watch newsletter for free
Your guide to what the 2024 US election means for Washington and the world
US stocks dropped sharply on Tuesday with shares in technology groups including Elon Musk’s Tesla selling off as investors continued fretting over President Donald Trump’s economic and trade policies.
The blue-chip S&P 500 fell 1.1 per cent by mid-afternoon in New York, with all of the index’s 11 sectors in negative territory and consumer cyclicals, which tend to fall during times of rising worries over the economy, posting some of the steepest declines.
The tech-heavy Nasdaq Composite dropped 1.6 per cent, erasing Monday’s rally. Tesla slumped 4.6 per cent — extending a recent decline that has brought it down by half from its December peak — and Nvidia lost 1.5 per cent ahead of chief executive Jensen Huang’s keynote speech at the chipmaker’s developer conference later on Tuesday.
The declines are the latest sign of how investors remain deeply concerned over Trump’s tariffs on America’s biggest trading partners, and increasing signs that they are slowing growth and increasing inflation. A Bank of America survey released on Tuesday showed investors made the “biggest-ever” cut to their US equity allocations in March.
A New York Federal Reserve survey of business leaders, released on Tuesday, showed that the region’s business environment was “considerably worse than normal” as employment declined and input prices for industry increased at the swiftest pace in almost two years.
A separate Fed report showed that US industrial production rose 0.7 per cent in February, far more than the 0.2 per cent increase expected by analysts. The reading should “sooth concerns that the [US] economy is on the cusp of recession”, said Bradley Saunders at Capital Economics.
He warned, however, that “the drag” from Trump’s aggressive tariffs has “yet to properly take effect”, meaning there was “downside to come for [US] industry over the coming months”.
Previously high-flying tech stocks have fallen more than most as investors have shifted away from riskier holdings, with an index tracking the so-called Magnificent Seven of Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla down 17 per cent since the S&P 500 hit a record high on February 19.
Traders were also bracing for the outcome of the latest Federal Reserve meeting on Wednesday. While investors are widely expecting the central bank to leave interest rates unchanged, any hints from Fed chair Jay Powell on the health of the world’s largest economy will be closely watched.
The dollar fell 0.1 per cent against a basket of rivals. The currency had already erased all its gains since November’s US presidential election.
