More like Obliteration Day than Liberation Day, at least in the minds of investors.
In a spectacle at the White House Wednesday afternoon marketed as “Liberation Day,” President Trump uncorked a baseline tariff rate of 10% that will go into effect on April 5.
A higher tariff rate will start on April 9 for about 60 countries that the administration considers to be the worst trade offenders.
Some of those nations are important sourcing and business regions for large US companies, such as Apple (AAPL), Nike (NKE), and Walmart (WMT). China, for example, will see reciprocal tariffs of 34%. Vietnam clocks in at 46%. Japan is at 24%.
The reciprocal tariffs are on top of existing duties, such as the 20% Trump imposed on China earlier, bringing the total rate on the country to 54%.
The markets were pounded to smithereens on the news, which sources tell Yahoo Finance came as negative shock. Electronics seller Best Buy (BBY) caught an instant downgrade by Citi as the products on its shelves will likely cost more and send customers to the sidelines.
Wall Street strategists warned the S&P 500 (^GSPC) could chart much lower from its newly depressed level.
And by the close of trading, the carnage was apparent as investors adjusted for possibly sharply lower economic and corporate earnings growth. The S&P 500 closed Thursday down 4.8%, the Dow Jones Industrial Average (^DJI) dropped 4%, and the Nasdaq Composite (^IXIC) shed 6%.
Stocks of companies that are global in nature tanked.
Nike plunged 14%, while Apple, Amazon (AMZN), and Walmart sank 9%, 9%, and 3%, respectively.
“I feel like this is a shoot first, ask questions later environment,” Kace Capital Advisors managing partner and Yahoo Finance Trader Talk podcast host Kenny Polcari said by phone. “So I think this is more of an overreaction. I think it’s just kind of a temper tantrum. A lot of it is algo driven, more than investor driven.”
Polcari added, “If you own high quality names that are getting dislocated just because of, you know, the short-term panic, then it creates an opportunity. So I’m not panicking at all.”
Here’s what sources are telling Yahoo Finance’s newsroom about the tariff impact to certain sectors and asset classes.
Tech stocks plummeted on Thursday, with Apple leading “Magnificent Seven” names lower after falling 9% to erase more than $300 billion from its market cap.
All told, the Mag Seven stocks lost over $1 trillion in value on Thursday.
“Apple produces basically all their iPhones in China, and the question will be around exceptions and exemptions on this tariff policy if those companies are building more operations, factories, and plants in the US like Apple announced in February,” Wedbush analyst Dan Ives said in a note following Trump’s announcement.
For now, Ives expects negotiations will happen over the coming months as companies attempt to navigate “this new world of tariffs.”
Until then, he warned, “tech stocks will clearly be under major pressure.”
Companies are “rethinking everything right now,” Telsey Advisory Group’s Joe Feldman told Yahoo Finance. Investors fear that near-term margins will take a hit for major footwear players like Nike, On (ONON), Crocs (CROX), Deckers (DECK), and Skechers (SKX), as well as sportswear players like Lululemon (LULU) and VF Corp (VFC), all of which have high exposure to China or Vietnam.
Investors also turned away from Target (TGT), Macy’s (M), and Gap (GAP) due to their exposure to manufacturing hubs like Vietnam, China, and Indonesia.
Dollar Tree (DLTR) finds itself in a tough spot. Direct imports make up 41% to 43% of its total retail value purchases, and China supplies the majority of those imports. Experts say that, in general, retailers will have less room to pass on costs to inflation-weary consumers compared to past years.
However, consumable-oriented retailers like Walmart and Costco (COST), in addition to grocers like Kroger (KR) and Albertson’s (ACI), are well insulated from tariffs since they source the majority of their food domestically, per Morgan Stanley.
Trump made good on his tariff threat for foreign-made autos, slapping 25% tariffs across the board on foreign-made cars that began on Thursday. Tariffs on the crucial auto parts sector will begin on May 3 after the Commerce Department determines appropriate levies.
“As we gather more information from industry participants, we increasingly believe that the burden of tariffs will be shared amongst OEMs, consumers (via higher ATPs), dealers, and some suppliers,” Deutsche Bank analyst Edison Yu wrote on Thursday.
Volkswagen (VOW3.DE) is set to add a 25% fee to cars impacted by tariffs. Stellantis (STLA) furloughed 900 workers at a Michigan factory. Meanwhile, Ford (F) is extending employee pricing across its models, and GM (GM) said it won’t have a tariff response until later this month.
Yu added that he expects automakers to try to shift production plans and capacity to the US without major new investment. But, he added, “We don’t think automakers and the supply base can make such structural changes quickly, especially amid more mid-term uncertainties around the political climate.”
If the 10-year Treasury is your growth proxy, it’s flashing warnings of a slowdown. The 10-year yield broke below 4% for the first since October this week, indicating “growth in the United States is set to deteriorate pretty significantly,” Brian Levitt, global market strategist at Invesco, told me on Catalysts.
Typically, when stocks fall, Treasury’s sell off, taking their prices lower and yields higher as investors look to risk-off. That dynamic changed this year, with Treasury prices gaining while stocks are falling for the first time since COVID-19 roiled markets in early 2020.
And lower yields tend to equate to lower stock prices when bonds are pricing in a slowdown, with Liz Ann Sonders of Charles Schwab saying the bond market is “in the driver’s seat” right now. Watch the 10-year yield to see where that drive takes the market next.
Oil prices plummeted on Thursday, while gold fell about 1% after reaching record levels on Wednesday.
“The panic selling [in oil] that’s occurring is very likely an overexaggeration of the true fundamentals,” Dennis Kissler, senior vice president for trading at BOK Financial Securities, told Yahoo Finance on Thursday.
“Near term, however, there’s a lot of unknowns, so you’re seeing a lot of funds unwind positions.”
Uncertainty in the global economy sparked demand fears, while a move from OPEC+ to increase production starting next month threatens to throw the supply-demand balance out of whack in the global oil market.
“Markets are still digesting tariffs,” KPMG US energy leader Angie Gildea told Yahoo Finance, “but the combination of increased oil production and a weaker global economic outlook puts downward pressure on oil prices — potentially marking a new chapter in a volatile market.”
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