On February 3, U.S. stock index futures plummeted due to concerns about a potential trade war and its impact on the global economy following President Donald Trump's implementation of substantial tariffs on Mexico, Canada, and China.
Trump imposed new tariffs of 25% on imports from Mexico and Canada, and 10% on China, acknowledging that this could cause "short-term" difficulties for Americans.
An analyst at GlobalData.TS Lombard expressed concerns about disrupting global capital flows by breaking global trade, a move seen as a strategy to revitalize the U.S. industrial economy.
Trump indicated plans to discuss the situation with Canada and Mexico, who have announced retaliatory tariffs, but appeared skeptical about potential changes in his decision.
Market reactions saw the iShares MSCI Mexico ETF and a Canadian-tracked ETF decline in premarket trading. The Dow E-minis, S&P 500 E-minis, and Nasdaq 100 E-minis also dipped significantly, alongside a notable decline in futures linked to the Russell 2000 smallcaps index.
Chip stocks experienced a decline, including Nvidia and Broadcom, while major tech stocks like Apple and Microsoft also decreased. Traditional automakers like Ford and General Motors faced downward trends.
Trump further hinted at potential European tariffs, with the pan-European STOXX 600 index showing a 1.4% decline.
Financial institutions like Goldman Sachs and Morgan Stanley expressed concerns over potential tariffs impacting S&P 500 earnings per share growth and placing pressure on U.S. equities.
Investors turned to safer assets like bonds, leading to a slight drop in Treasury yields, while the dollar index remained stable.
Future market focus included ongoing quarterly earnings reports, with companies such as Alphabet, AMD, PayPal, and Eli Lilly set to announce results. Expectations for important economic indicators like January manufacturing data and the January non-farm payrolls report later in the week were also noted.
In the crypto market, bitcoin-related stocks saw a decline as bitcoin prices dropped globally. Notable movements included Exchange operator Coinbase, MicroStrategy, and the ProShares Bitcoin ETF experiencing losses.