Wall Street started the week lower, pulling back from recent gains that followed a more conciliatory tone on trade last month. The pullback followed a shock announcement from US President Donald Trump that he would double tariffs on imported steel and aluminum. The shift rekindled trade tensions that had eased for a while and overshadowed optimism from earnings and economic data of late.
Markets jumped just last week when the threat of higher tariffs was eased and corporate results came in better than expected, lifting the S&P 500 to its best monthly gain in 18 months. But that tone changed dramatically on Monday. Speaking Friday night, Trump said tariffs on imported steel and aluminum would jump to 50% on Wednesday. His comments came in the wake of accusations that China violated trade agreements.
The steelmaker stocks soared on the policy change. Cleveland-Cliffs surged 28.3%; Nucor advanced 11.5%; and Steel Dynamics rose 11.3%. Those gains were a result of investors betting on U.S. steel producers to report expanded profitability.
On the other hand, automakers performed worse. Shares of Ford and General Motors each fell more than 4%, in a sign that concerns about elevated raw materials costs remain. Analysts say the tariff increase injects fresh uncertainty into global trade, raises the risk of disruptions to investment and supply chains, and, by contributing to a high-stakes U.S.-China standoff, threatens growth in both countries and the rest of the world.
Peter Andersen, founder of Andersen Capital Management, said that People have been thinking about that (steel tariffs) and trying to formulate the economic impact. It presents the markets with a lot of uncertainty right now.”
The Dow Jones Industrial Average fell 208 points, or 0.49%, to 42,061.61. The S&P 500 fell 15.78 points, or 0.27 percent, to 5,895.91. The Nasdaq Composite slipped 10.10 points, or 0.05 percent, to 19,103.67. Nearly every sector in the S.&P. 500 ended trading in negative territory, with consumer discretionary stocks down almost 1 percent.
Energy shares provided modest support for the broader market. The energy sector climbed 0.8% as oil prices rose on news OPEC+ was likely to refrain from increasing output in July. Energy firms listed in the United States followed that gain, helping to cushion losses elsewhere.
Geopolitical tensions erupted at other places too. According to reports, Kyiv targeted Russian bombers with the capability of being fitted with nuclear weapons, once again stoking fears of an escalation of the conflict. This added to an overall global risk-off mood.
Tesla, meanwhile, was the biggest drag on growth stocks with a 2.5% fall after it posted lower monthly sales in some European countries. Other tech and growth names similarly slipped.
Economic reports contributed to worries as well. The Institute for Supply Management said that the manufacturing index was at 48.5 for May, below the anticipated 49.3. Reading below 50 indicates contraction, raising concerns about factory activity.
Now, eyes are turning to Federal Reserve Chair Jerome Powell, who is due to speak later Monday. Investors will be reading the tea leaves for clues about future interest rate moves. A critical nonfarm payrolls report later in the week will offer additional insight on the labor market’s health.
On the New York Stock Exchange, declining stocks outnumbered advancers by nearly two to one. On the Nasdaq, that ratio stood at 1.43 to one. The Nasdaq saw 51 new highs and 63 new lows, while the S&P 500 recorded 10 new highs and four lows.
