$3.1 Trillion Wiped Out in Worst Day for the Markets Since 2020
$3.1 Trillion Wiped Out in Worst Day for the Markets Since 2020
By:JJ Kinahan
China retaliates to tariffs and the odds of a recession surge to 60%
- An historic market sell-off is signaling investors’ growing anxiety over the trade war and global tariffs.
- Meanwhile, the sharp drop In oil and bond yields reflects increasing concern over a U.S. economic slowdown.
- An elevated volatility index suggests fear is increasing but presents strategic opportunities for option traders.
Wall Street has long said that stocks “stair-step higher and go down like an elevator,” but recent market action resembles an elevator in free fall. On Thursday, U.S. equities suffered their worst day since March 2020, with a staggering $3.1 trillion in market value wiped out. The S&P 500 fell nearly 5%, while the Nasdaq dropped 6%, led by heavy tech losses. The Russell 2000 declined 6.5%, and the Dow shed 4%.
Ten of the 11 S&P 500 sectors ended the day in the red, with energy down the most at 7.5%. Consumer staples was the lone gainer, up 0.7%. Beneath the surface, some stocks fell more than 10%, with Apple (APPL) losing 9%—marking its second-largest notional market value loss in history. Premarket indicators suggest the sell-off is likely to continue.
Tariffs causing turmoil
The market shock came in response to President Trump’s tariff announcement after Wednesday’s close. The measures were far more aggressive than expected and had not been fully priced into the market.
The European Union will face a 20% tariff, and China will see an additional 34% increase atop existing tariffs. A blanket 10% tariff on all imported goods was also announced, raising the overall weighted-average tariff to 23%, per The Wall Street Journal.
Other nations have begun retaliating, escalating tensions. China responded early Friday with a 34% tariff on all U.S. imports, effective April 10. It also announced a halt to some agricultural purchases and tighter controls on rare earth exports.
As a full-blown trade war unfolds, fear of recession is rising. J.P. Morgan now places the odds of a U.S. recession at 60%. Evidence of a slowdown is emerging beyond equities. Oil, often viewed as a proxy for economic health, has plunged over 15% since Wednesday—from $72 to just above $61. Meanwhile, bond prices are climbing, pushing 10-year yields below 3.9%, down from 4.77% earlier this year.
Job creation beats expectations
On the economic front, Friday’s employment report showed 228,000 new jobs vs. an anticipated 139,000, but previous months were revised downward by 48,000. Unemployment ticked up to 4.2%.
Federal Reserve Chair Jerome Powell speaks at 10:25 a.m. CDT today, and markets may be hoping for dovish comments. The VIX surged to 45.56 in premarket trading, signaling potential panic, though it has since dipped below 40.
Traders may find opportunity in high option premiums. Regardless, sticking to a long-term investing plan remains key.
JJ Kinahan is CEO of tastytrade from IG—which includes tastylive, tastyfx and tastycrypto. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan
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