Stocks Hit by Wild Volatility on US-China Threats: Markets Wrap

(Bloomberg) — Wild swings lashed Wall Street for a fourth straight session as back-and-forth trade threats between the US and China knocked down stocks, erasing an earlier rally that was the biggest since 2022. The S&P 500 fell 1.6%, leaving it on the brink of a bear market.

Hopes for a quick end to extreme volatility were dashed after a White House official said the US is moving forward with tariffs on China as high as 104% while Premier Li Qiang said his country has ample policy tools to “fully offset” negative external shocks. Long-term Treasury yields soared after a lackluster US sale of notes highlighted cracks in the haven status of government debt.

Tuesday’s slide extended the S&P 500’s drop since the president detailed worldwide levies last Wednesday to more than 12% and at one point pushed the gauge down 20% since its record close in February, though stocks bounced at that level. It was also another day of nearly unprecedented volume on US equity markets, with more than 23 billion shares changing hands.

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“The volatility reflects the new situation in which no one knows what the rules of road are, or even what the desired destination is,” said Que Nguyen at Research Affiliates LLC. “Until investors reset expectations or those rules and goals are better understood, markets will continue these wild swings between hope and fear.”

Across world markets, investors have been gripped by concerns that something may break in the financial plumbing amid the cross-asset volatility, spurring speculation the Federal Reserve may need to speed up rate cuts to prevent a recession even with inflation jitters running rampant.

“The fundamental reason for the drawdown has been policy uncertainty – it’s functionally impossible to put in a bottom until that fundamental reason has been resolved, or at least until there is directional clarity on it,” said Scott Ladner at Horizon Investments.

Trump spent the final hours before his sweeping tariffs were set for full implementation lining up talks with key US allies, but hopes for a last-minute agreement with China appeared distant.

As foreign nations appeal to Washington for negotiations, Treasury Secretary Scott Bessent said there’s the potential for advantageous trade deals. Japan looks set to get priority in US tariff talks while Trump said prospects for a deal with South Korea were “looking good.” 

“Tariffs go into effect tomorrow, so that’s the kickoff point of negotiation,” said Andrea DiCenso, co-portfolio manager of the Alpha Strategies Team at Loomis, Sayles & Co. “We’re just going to be living through a barrage of headlines, every single day, all day: Who did the administration meet with? What was the outcome? And then we go back and forth, and back and forth.”

As Trump’s trade war sent markets into a tailspin, Bank of America Corp. clients posted their fourth-biggest inflow into US equities on record last week: $8 billion.

Institutional clients, retail traders and hedge funds were all net buyers, strategist Jill Carey Hall wrote in a Tuesday research note.

Meantime, warnings from Wall Street strategists keep piling up on the dour outlook for stocks.

BlackRock Inc. strategists Jean Boivin and Wei Li downgraded US equities on Monday to neutral from overweight on a three-month horizon, saying they expect “more pressure on risk assets in the near term given the major escalation in global trade tensions.”

And a strategy team at Goldman Sachs Group Inc., including Peter Oppenheimer and Lilia Peytavin, said the equity selloff could well turn into a longer-lasting cyclical bear market as recession risks mount.

Key Events This Week:

• Federal Reserve minutes, Wednesday
• Fed’s Tom Barkin speaks, Wednesday
• China PPI, CPI, Thursday
• US CPI, jobless claims, Thursday
• Fed’s Michelle Bowman’s nomination hearing in Senate for the position of vice chair for supervision, Thursday
• Fed’s Austan Goolsbee, Patrick Harker, Lorie Logan, Jeff Schmid speak, Thursday
• US PPI, University of Michigan consumer sentiment, Friday
• Major banks reporting earnings include JPMorgan Chase, Bank of New York Mellon, Morgan Stanley, Wells Fargo, Friday
• Fed’s John Williams and Alberto Musalem speak, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 1.6% as of 4 p.m. New York time
• The Nasdaq 100 fell 2%
• The Dow Jones Industrial Average fell 0.8%
• The MSCI World Index fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.4% to $1.0955
• The British pound rose 0.4% to $1.2772
• The Japanese yen rose 1% to 146.29 per dollar

Cryptocurrencies

• Bitcoin fell 2.8% to $76,752.34
• Ether fell 6.7% to $1,465.6

Bonds

• The yield on 10-year Treasuries advanced nine basis points to 4.27%
• Germany’s 10-year yield advanced two basis points to 2.63%
• Britain’s 10-year yield declined one basis point to 4.60%

Commodities

• West Texas Intermediate crude fell 3.5% to $58.56 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Phil Kuntz, Robert Brand, Anand Krishnamoorthy and Aya Wagatsuma.

©2025 Bloomberg L.P.