This week serves as a good reminder to market participants that investing is a marathon and not a sprint – and that the path of the race has always been up and to the right.
That said, today’s trajectory was straight down, with all three main indexes suffering notable losses and one sinking into bear-market territory.
The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite opened sharply lower for a second straight day after China matched the Trump administration’s 34% retaliatory tariff on imports with one of its own.
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Beijing also added 11 companies to its “unreliable entity list,” including Insitu, a drone maker owned by Boeing (BA). BA stock dropped 9.5% in reaction, making it the worst Dow Jones stock today.
The main indexes came off their early lows ahead of a late-morning appearance from Federal Reserve Chair Jerome Powell.
But the selling quickly picked up after Powell said that President Donald Trump’s tariff policy is “significantly larger than expected” and will have a bigger impact on the economy and inflation than initially anticipated.
Still, Powell was quick to note that all data he’s seeing, while backward-looking, indicates the economy remains resilient and that the Fed is well-positioned to address whatever is to come.
The Nasdaq enters a new bear market
At the close, the blue chip Dow was down 5.5% to 38,314 – falling into correction territory, which is defined as a 10% drop from the most recent high. The broader S&P 500 extended its correction, finishing 6.0% lower at 5,074.
And the tech-heavy Nasdaq plummeted 5.8% to 15,587 – entering a new bear market, which is a 20% drop from its most recent high. (The small-cap Russell 2000 fell into bear-market territory on Thursday.)
Just how bad is the stock market sell-off?
The rout in U.S. stocks that occurred over Thursday and Friday erased $6.4 trillion in market value – the biggest ever two-day drop, according to Dow Jones Market Data.
Also troubling: The U.S. market has now wiped out $10 trillion in value since Inauguration Day.
This likely marks the end of the bull market, says Emily Bowersock Hill, CEO and founding partner at Bowersock Capital Partners, “and it was destroyed by ideologues and self-inflicted wounds.”
Indeed, the panic selling is happening because “the Trump administration is trying to sell the trade war to America and the market isn’t buying it,” says Jay Woods, chief global strategist at Freedom Capital Markets.
“People are sick of this uncertainty rhetoric, they don’t see how tariffs will do anything but potentially throw the U.S. into a recession and are now rushing to yank their money out of the markets,” he adds.
March jobs growth comes in strong
As Powell noted, data continue to show the economy remains resilient. This morning’s release of the March jobs report, for example, came in much higher than expected.
According to the Bureau of Labor Statistics, nonfarm payrolls rose by 228,000 in March. This was higher than both the upwardly revised February figure of 117,000 new jobs as well as the 140,000 economists expected. January jobs growth was revised down by 14,000.
The unemployment rate, which is calculated from a separate survey, ticked higher to 4.2% from 4.1% in February.
“On the surface, this appears to be a bullish number, but it is important to understand that this is backward-looking data,” says Larry Tentarelli, chief technical strategist for Blue Chip Daily Trend Report.
Tentarelli, says that markets are much more concerned with future data and his concern is that “higher-than-expected tariffs are going to lead to a major slowdown in hiring and the labor market.”
As for what investors should do, the strategist recommends maintaining a defensive portfolio position with U.S. Treasury bonds and gold and keeping well-above-average cash levels.
Earnings season is on deck
The immediate fear for investors going into the weekend is that the trade war escalates, Freedom Capital’s Woods says.
In the intermediate term, Wall Street will be keeping a close eye on corporate earnings and guidance.
First-quarter earnings season unofficially gets underway late next week, with several of the country’s biggest banks set to report.
Woods believes earnings results and guidance “will be that much tougher” for U.S. companies considering they “are still trying to navigate the uncertainty with the tariffs and can’t adjust and/or guide given the current environment.”
Check out the Kiplinger earnings calendar to see which companies will be reporting and when.