The prevailing uncertainty triggered a flight towards traditional safe-haven assets. Gold prices surged by nearly 3%, reaching an unprecedented all-time high, underscoring investors' desire for security amidst market volatility. Simultaneously, the U.S. dollar weakened considerably, hitting a 10-year low against the Swiss franc, a currency often perceived as a stable store of value during times of economic unease.
In contrast to the equity and currency markets, the U.S. Treasury market showed relative stability, with most Treasury prices edging slightly higher. A robust bond auction on Thursday helped to alleviate concerns about demand for U.S. debt, particularly in the context of the tariff-induced market fluctuations. It's worth noting that Treasuries had faced a sharp sell-off earlier in the week, indicating the dynamic nature of investor responses to the evolving trade narrative.
A significant factor contributing to the renewed market jitters is the lingering ambiguity surrounding the tariff situation and the broader trade war. While President Trump's Wednesday announcement of temporary tariff reductions had initially sparked a relief rally, his simultaneous statement about raising tariffs on Chinese imports, coupled with the White House's confirmation that a 10% blanket duty on a wide range of U.S. imports would remain in effect, injected fresh uncertainty into the market. The White House further clarified that U.S. tariffs on Chinese goods have now reached a substantial 145% following the latest increase.
"The realization is that while we got some good news yesterday, we still have to live in a world where there's new uncertainty," commented Art Hogan, chief market strategist at B Riley Wealth in New York, encapsulating the cautious sentiment permeating the market.
Interestingly, the stock declines occurred despite the release of U.S. economic data revealing an unexpected fall in consumer prices in March. This suggests that concerns over trade policies and their potential economic impact are currently outweighing positive domestic economic indicators in influencing investor behavior.
Adding another layer of complexity to the market landscape, investors are also bracing for the commencement of the quarterly U.S. earnings season. Results from some of the nation's largest financial institutions, including JPMorgan Chase, are due on Friday. Amidst the ongoing economic uncertainty, analysts anticipate that many companies may revise their forward-looking guidance, further contributing to market volatility.
"There will still be a lot of pulled guidance," predicted Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa. "It may be that the market is taking back some of yesterday's rip-your-face-off rally because they realize some of the relief is not as great as they thought."
The recent market turbulence underscores the significant impact of trade policy announcements on investor confidence. Following the whipsaw trading of Wednesday's surge and Thursday's selloff, the S&P 500 remained 7.1% below its level just prior to the initial imposition of reciprocal tariffs last week, highlighting the substantial market reaction to these trade developments.
At the close of trading on Thursday, the Dow Jones Industrial Average plummeted by 1,014.79 points, or 2.50%, to settle at 39,593.66. The S&P 500 experienced an even steeper decline, falling by 188.85 points, or 3.46%, to close at 5,268.05. The technology-heavy Nasdaq Composite suffered the most significant losses, dropping by 737.66 points, or 4.31%, to end the day at 16,387.31.
The global ramifications of the U.S. market movements were also evident. MSCI's gauge of stocks across the globe fell by 0.77%. However, it's important to note that Trump's Wednesday tariff reversal had provided a boost to overseas equities, with the pan-European STOXX 600 index closing up by 3.7%, and Asian stocks also finishing significantly higher.
In response to the U.S.'s 90-day pause on some tariffs, the European Union announced its intention to delay retaliatory levies on American goods. This decision reflects the ongoing efforts within the EU to negotiate trade deals with Washington, signaling a complex and evolving global trade landscape. European Commission chief Ursula von der Leyen highlighted the bloc's strategic approach in navigating these trade tensions.
In the currency markets, the dollar weakened against most major peers. Notably, the dollar depreciated sharply against the Swiss franc, falling by 3.89% to 0.825. The euro strengthened by 2.23% against the dollar, and the Japanese yen also gained ground, with the dollar weakening by 2.07% to 144.66.
The U.S. Treasury Department's successful auction of 30-year bonds on Thursday, following a strong sale of 10-year notes the previous day, provided some reassurance regarding demand for U.S. debt. This came after concerns had arisen about potential reluctance from buyers amidst the heightened market volatility.
Analysts have attributed the rapid increases in bond yields earlier in the week to significant liquidations by hedge funds and other asset managers, who were unwinding trades and selling assets in response to margin calls and losses. Furthermore, concerns had been mounting that major holders of U.S. Treasuries, such as China, might be reducing their holdings as the trade war between the world's two largest economies intensified.
At the close of trading, the 10-year Treasury note yield was slightly down by 1 basis point at 4.386%, while the more interest-rate sensitive two-year Treasury yield fell by a more significant 11 basis points to 3.843%. It's important to remember that bond yields move inversely to prices.
In the energy markets, oil prices retreated, erasing the gains from the previous session. U.S. crude oil futures declined by $2.28 to settle at $60.07 per barrel, and Brent crude futures eased by $2.15 to end the day at $63.33 per barrel.
Finally, spot gold continued its upward trajectory, rising by 2.6% to $3,160.82 per ounce after reaching a record high of $3,171.49 earlier in the session, further emphasizing the investor appetite for safe-haven assets during this period of market uncertainty.