Trading was volatile, following conflicting tariff updates, while progress toward a ceasefire between Ukraine and Russia briefly lifted equities.
The S&P 500 index dropped as low as 5,528.41 points, briefly marking a 10% fall from its record closing high of 6,144.15 on Feb 19, which is commonly known as a market correction. President Donald Trump said he would double tariffs set to take effect within hours on all imported Canadian steel and aluminum products to 50%.
The latest tariff threat added to investor unease that Trump’s trade policies, which include tariffs against Canada, Mexico and China, could trigger an economic slowdown or cause a recession.
On Monday, the S&P 500 recorded its most significant one-day drop since Dec 18, wiping out just over US$1.3 trillion in market value, and a staggering US$4 trillion from its recent peak. The tech-heavy Nasdaq confirmed a 10% correction late last week.
The benchmark S&P index is down more than 3.4% over the past two sessions, its largest drop since early August.
“That creates just angst and nervousness in the market, so you’re going to continue to get the ‘shoot first, ask questions later’ type of reaction, which is exactly what you’re getting,” said Ken Polcari, chief market strategist at SlateStone Wealth in Jupiter, Florida.
Stocks gained some traction after the US agreed to resume military aid and intelligence sharing with Ukraine immediately after talks in Saudi Arabia in which Kyiv voiced readiness to accept a US proposal for a 30-day ceasefire in its conflict with Russia, the countries said in a joint statement.
Adding to the positive momentum, Ontario’s premier said he had agreed to suspend the Canadian province’s 25% surcharge on exports of electricity to Michigan, New York and Minnesota.
“The market’s looking for something to get hopeful about after the last week or so, but we always say it’s hard to make changes based on something that might happen,” said Chris Fasciano, chief market strategist at Commonwealth Financial Network in Waltham, Massachusetts.
“So until you see an idea, whether it’s Russia, Ukraine, or whether you see what tariffs are finally going to be or what government spending is finally going to be, it’s hard to make wholesale changes in portfolios.”
The Dow Jones Industrial Average fell 478.23 points, or 1.14%, to 41,433.48, the S&P 500 lost 42.49 points, or 0.76%, to 5,572.07 and the Nasdaq Composite lost 32.23 points, or 0.18%, to 17,436.10.
Global markets have been upended since Trump sparked back-and-forth tariff moves against major trading partners while recent economic data has indicated the economy may be softening. A reading on consumer prices on Wednesday will show if progress is being made on tamping down inflation.
Meanwhile, a US labor department report showed job openings increased in January.
Each of the 11 major S&P sectors was lower, although technology and consumer discretionary sectors, the two worst performing sectors on the year, saw the smallest declines.
Tariff uncertainty has also weighed on consumer sentiment, with company executives increasingly flagging the impact it can have on upcoming earnings.
Kohl’s forecast a bigger-than-expected drop in annual comparable sales, sending the retailer’s shares plummeting 24.1%.
Dick’s Sporting Goods dropped 5.7% after the retailer forecast downbeat annual results.
Delta Air Lines stumbled 7.3% after the carrier slashed its first-quarter profit estimates by half.
American Airlines slumped 8.3% after the carrier forecast a bigger-than-expected first-quarter loss. Weakness in the airlines helped send the Dow transport index down 3.1%.
Oracle lost 3.1% after the cloud company missed quarterly revenue estimates.
Citi became the latest brokerage to revise its stance on US stocks, downgrading its recommendation to “neutral.”
Declining issues outnumbered advancers for a 1.6-to-1 ratio on the NYSE and by a 1.1-to-1 ratio on the Nasdaq.
The S&P 500 posted four new 52-week highs and 17 new lows, while the Nasdaq Composite recorded 22 new highs and 352 new lows.
Volume on US exchanges was 19.01 billion shares, compared with the 16.56 billion average for the full session over the last 20 trading days.