Wall Street slides as trade war escalates; S&P 500 confirms correction

NEW YORK: Wall Street ended sharply lower on Thursday (Mar 13) and the S&P 500 confirmed it is in a correction after cool inflation data was overshadowed by fears that the escalating, hydra-headed tariff war being waged by the United States against its biggest trading partner could reignite inflation and tip the economy into recession.

A broad selloff sent all three major US stock indexes tumbling, with losses in tech and tech-related megacap shares dragging the Nasdaq down most.

"Sentiment's terrible," Mike Dickson, head of research at Horizon Investments in Charlotte, North Carolina. "There's new tariff headlines every day, and that’s weighing on things."

"And you’re seeing it most acutely in some of the more sensitive areas of the market like the fairly inflated Magnificent 7," Dickson added. "It doesn't feel great out there right now."

The S&P 500 closed more than 10 percent below its Feb 19 record closing high, confirming the bellwether index has been in a correction since then.

On Mar 6, the Nasdaq confirmed it is in a correction by closing 10.4 percent lower than its all-time closing high reached on Dec 16.

"There's still a lot of uncertainty concerning the economy," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

"Some of that uncertainty is certainly being driven by tariffs, but there's other uncertainty out there, and it's got investors thinking maybe the hard landing is happening after all."

In the latest episode of Trump's multi-front trade war, the European Union responded to blanket US tariffs on steel and aluminum by imposing a 50 percent tax on American whiskey exports, prompting the president to threaten on Truth Social to charge a 200 percent tariff on imports of European wines and spirits.

A Reuters/Ipsos poll of Americans conducted Mar 11-12 showed that 57 percent of poll participants believe Trump's moves to shake up the economy are too erratic, and 53 percent think the tariff war will do more harm than good.

The Labor Department's Producer Price Index (PPI) appeared to echo Wednesday's CPI data, with cooler-than-expected readings appearing to confirm inflation remains on its meandering path downward as it approaches the US Federal Reserve's 2 percent annual target.

This, along with a tame jobless claims report, provided some assurance that, for now, inflation is headed in the right direction and the labor market is on solid footing.

Markets were also eyeing the ongoing wrestling match on Capitol Hill as lawmakers scramble to pass a stop gap spending bill ahead of a fast-approaching deadline to avert a partial government shutdown.

According to preliminary data, the S&P 500 lost 77.74 points, or 1.39 percent, to end at 5,521.56 points, while the Nasdaq Composite lost 343.77 points, or 1.95 percent, to 17,304.68. The Dow Jones Industrial Average fell 537.67 points, or 1.30 percent, to 40,813.26.

Intel jumped after the chipmaker appointed industry veteran Lip-Bu Tan as its chief executive officer.

Adobe dropped after the software company forecast quarterly revenue in line with estimates.

Discount retailer Dollar General reported disappointing same store sales estimates but provided upbeat quarterly results, sending its shares higher.