S&P 500 Futures Sink as Bonds Jump on US Tariffs: Markets Wrap

(Bloomberg) — A tariff offensive Donald Trump billed as key to America’s long-term prosperity went down badly in markets late Wednesday, setting off a rout in equities that had rallied on hopes the program would be less draconian.

S&P 500 futures sank over 3.5% while contracts on the Nasdaq 100 slid 4.5%. Treasury futures surged alongside bonds in Australia and New Zealand, with the flight to haven also lifting the Japanese yen. Trump said he will apply a minimum 10% tariff on all exporters to the US and slap additional duties on around 60 nations. That includes substantially higher rates on some of top trading partners, such as China, the European Union and Vietnam.

The late-session swoon halted three days of gains in the S&P 500 as hopes were dashed the tariff program would be lighter touch. Traders across asset classes now must brace for what promises to be a grueling stretch of trade negotiations, against an economic backdrop that has shown signs of softening as companies and consumers adjust to Trump’s offensive.

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“Eye-watering tariffs on a country-by-country basis scream ‘negotiation tactic,’ which will keep markets on edge for the foreseeable future,” said Adam Hetts at Janus Henderson Investors.

The White House said steel and aluminum imports won’t be subject to reciprocal tariffs in a move that will provide at least some relief to domestic buyers already incurring 25% duties on all imports of the key metals used in everything from automobiles to dishwashers.

Shares of companies linked to sectors that will be hardest hit by the new round of levies were sharply lower in late New York trading. Nike Inc., Gap Inc. and Lululemon Athletica Inc. all fell at least 7%. They rely on goods and factories from Vietnam. Apple Inc., whose supply chain is heavily dependent on China, fell as much as 6.9%. Chipmakers such as Nvidia Corp. and Advanced Micro Devices Inc. were down, as were multinationals Caterpillar Inc. and Boeing Co.

Treasury Secretary Scott Bessent urged US trading partners against taking retaliatory steps against Trump’s new set of tariffs.

“As long as you don’t retaliate this is the high end of the number,” Bessent told Bloomberg Television. 

“That should slow trade and raise prices squeezing profit margins,” said Michael O’Rourke at JonesTrading Institutional Services. “This will further slow a decelerating economy as it it creates friction and distortion in global trade. I think we need to expect retaliation, which will likely lead to further escalation.”

Trump has on several occasions signaled willingness to endure short-term pain in order to ensure American companies are treated more fairly abroad. “There is a period of transition, because what we’re doing is very big,” he said on March 9 when asked about the impact on the economy. In his March 4 in his address to Congress he said: “There’ll be a little disturbance, but we’re okay with that.”

To Steve Chiavarone at Federated Hermes, if Wednesday’s announcement marks the most draconian levels of tariffs, and the news flow from here is about how countries are negotiating reductions to these rates, that could be good for markets. 

“This may create enough of a selloff over the next day or so that it creates a buying opportunity,” he said. “Worst case scenario today would’ve been a low rate with threats of escalation. I’d rather, at this point, have higher rates with the potential to deescalate.”

To Chris Zaccarelli at Northlight Asset Management, markets are going to continue to struggle with the speed at which tariff details change as well as the ultimate result of the tariffs themselves.

“The silver lining for investors could be that this is only a starting point for negotiations with other countries and ultimately tariff rates will come down across the board – but for now traders are shooting first and asking questions later,” he said.

Before the Bell: Tariff Day, Hedge Funds Sell Most In 12 Years

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