(Reuters) -Wall Street's main indexes fell hard again on Thursday on concerns over the impact of high tariffs on the global economy, marking a U-turn from the previous session's historic gains when U.S. President Donald Trump moved to temporarily lower the levies on some countries.
The renewed selling came a day after the new levies took effect on most trading partners, rattling markets, and Trump then announced a 90-day pause on many of the reciprocal tariffs, while raising them further on Chinese imports. That catapulted the S&P 500 to its biggest single-day percentage gain since 2008, while the Nasdaq posted its biggest one-day jump since 2001. The two indexes were down 4.6% and 5.4%, respectively, Thursday afternoon.
COMMENTS:
JJ KINAHAN, CEO OF IG NORTH AMERICA, PRESIDENT OF TASTYTRADE, CHICAGO
"It seems to be setting up for a little bit of China versus the U.S. People were glad to see that many other countries got left to where they were at least for now.
"With that, I also think a lot of shorts yesterday were getting squeezed and the momentum fed on itself to the upside. As we kept going higher they had to cover short positions and you had a lot of people going through that door at the same time."
"Today, the tariff situation leaves a lot of question marks as to what happens with China. At the end of the day we're still operating in an area of unknown and if there's one thing the market hates is unknowns. China is a very large trading partner with a lot of dependencies. "
"There still could be inflationary pressure. There's also a question about how you come back from that longer term, to the relationship with China. That becomes a bit of a concern also."
JIM CARROLL, SENIOR WEALTH ADVISOR & PORTFOLIO MANAGER, BALLAST ROCK PRIVATE WEALTH, CHARLESTON, SC
“This is bonkers. I think a lot of retail clients, talking to their advisors after this latest downturn, are saying, just get me out of the way of this landslide and we can come back later. What they’re feeling is an unusual degree of anxiety. In many ways this is different even than Trump 1.0. and it feels that it could be more serious. We’re backing China up against a wall. What’s going to happen next? It frightens people.
“I’m talking to our own clients every day, who do have some unrealized losses as a result of this although nothing close to what we might have had. The conversations happen constantly, and the questions are do we realize some of these losses now because they might get worse, or realize them to offset some gains in other parts of the portfolio?
“What we saw yesterday had all of the signs of being a short squeeze, the result of people who were offside needing to be onside again being tapped on the shoulders by risk managers, and told hey, it’s time to close out those short positions. But then when the dust settled overnight and people realized that the biggest player in this game is China and we’re still leaning hard on China, the enthusiasm waned.
“We’re in for a period of volatility in both directions. That is what happens when things get like this, you get these violent moves in both directions. When the uncertainty is this high, I don’t have a clue what will be happening next. I don’t have an Excel spreadsheet spitting out an answer.”
MICHAEL BROWN, SENIOR RESEARCH STRATEGIST, PEPPERSTONE, LONDON
"The move higher after Trump's Truth Social post was incredibly violent and sizable in nature ... so it's no surprise to see a little bit of a pullback and some of the wind come out of the sails as the market takes a bit of a pause for breath."
"Somewhat calmer heads are starting to prevail just a little bit from this euphoria that we saw yesterday... the 10% baseline tariff on everyone else is very punchy indeed. The worst case scenario on trade has been avoided but it's not all as fine and dandy as we'd like it to be. We've built in 90 days worth of humongous uncertainty now, which is certainly not going to do (volatility) sellers any favour whatsoever."
ADAM HETTS, GLOBAL HEAD OF MULTI-ASSET, JANUS HENDERSON, DENVER
"We're still left with this other scenario, which is still not a good scenario of the 10% baseline, the tariffs on autos, aggressive counter tariffs and trade war-style escalation with China and Europe."
"So this still gets back to the bear case and sort of the recessionary case. And we still think it's a sell off base case. This has gone from a disorderly sell-off to hopefully back to more of an orderly sell-off because recession risk is much, much higher now than it was a couple weeks ago."
ART HOGAN, CHIEF MARKET STRATEGIST, B RILEY WEALTH, NEW YORK
"The overall level of tariffs is still higher than what was originally announced and there was an addition to that this morning and that's about when the markets turned a bit. So the realization is that while we got some good news yesterday, we still have to live in a world where there's new uncertainty and the tariffs on China now total 145%. "While yesterday seemed to be a significant rally in the face of good news in terms of the potential for negotiations, the bad news is the trade war with China continues to escalate. And that's what's trying to be priced in by market participants today."
MARC CHANDLER, CHIEF MARKET STRATEGIST, BANNOCKBURN GLOBAL FOREX, NEW YORK
“Seeing the world as a zero-sum game is not very helpful. I don’t see this as a zero sum but that’s what the administration is pushing.”
“The uncertainties that loom have a real cooling element.”
“The market requires a higher U.S. interest rate premium to stay long dollars… The dollar is going to require higher premium in order to keep the dollar firm.”
SAMEER SAMANA, HEAD OF GLOBAL EQUITIES AND REAL ASSETS, WELLS FARGO INVESTMENT INSTITUTE, CHARLOTTE, NORTH CAROLINA
"It's not surprising for two reasons. One, yesterday was a big up day and for anybody who was looking for ... a chance to sell something that maybe they wish they had sold at the lows of the bear market, they probably are now selling. They probably sold yesterday and they're probably selling today. And I think it just shows you how many people are thinking, we're just not sure what is going to happen next, so we're going to just take the money and run, with respect to the huge pop we saw yesterday."
"And then the second part of it, which is somewhat related, is, I don't know what happens next, right? Do we do this whole thing in 90 days?"
"They say they want to make deals, but what if the other side isn't offering exactly what they would like? Do we do it all again in three months? So I think it's that uncertainty that continues to just weigh on markets."
"I think there are people going, 'Look, I'm going to kind of move to the sidelines and come back when the landscape is a little cleaner.' "
(Compiled by the Global Finance & Markets Breaking News team)
