Stocks Plunge as Market Correction Accelerates Amid Fear of Trade Wars
Stocks Plunge as Market Correction Accelerates Amid Fear of Trade Wars
By:JJ Kinahan
The S&P 500 is struggling below key support as volatility remains elevated as gold hits record high
- Market volatility is increasing as stocks enter correction territory.
- Trade war uncertainty weighs on consumer confidence and weakens corporate forecasts.
- Gold surges to record highs as investors seek safe havens.
Yesterday proved challenging for stocks, with technology shares leading the market lower. The Nasdaq Composite dropped nearly 2%, bringing its total losses for the week to 5%. The Russell 2000 declined by 1.5% and is now down 4% for the week. The Dow Jones Industrial Average fell 1.3%, marking a 4.7% weekly loss. Meanwhile, the S&P 500 slid 1.4%, pushing its weekly decline to 4% and officially moving into correction territory.
This marks the seventh-fastest correction since 1929, occurring in just sixteen days, according to Bloomberg. Since President Trump took office, the market has now fallen 8%, largely driven by fear surrounding tariffs.
On Wednesday, President Donald Trump warned that if the European Union (EU) imposed tariffs on U.S. alcohol exports, he would respond with a 200% tariff on EU alcohol exports.
Problematic trade policies
The ongoing uncertainty over trade policies and fluctuating tariffs has made it difficult for companies to forecast and budget, contributing to heightened market volatility. As a result, major stocks like Apple (AAPL) are on track for their worst week since the onset of the COVID-19 pandemic.
Beyond the stock market, consumers are feeling concern about the trade war’s economic impact. A recent Conference Board survey indicates vacation plans for the next six months are at their lowest level in 15 years. That decline in consumer confidence has weighed on travel-related stocks, with Carnival Cruise Lines (CCL) dropping nearly 35% since January.
The retail sector is also feeling the impact, as companies like Ulta Beauty (ULTA) report strong earnings but warn of slowing sales. Despite a 6% gain in premarket trading, Ulta’s stock has dropped 28% this year and hit a new 52-week low yesterday.
Crude oil prices are attempting to break a seven-week losing streak because falling crude prices often signal economic slowdowns. Similarly, gold prices have surged past $3,000 per ounce, reaching an all-time high as investors seek safe-haven assets amid market turbulence.
But at least one bit of news seems encouraging.
Democrats voting for Republican spending bill
One positive development is that Senate Democrats plan to vote in favor of the House’s continuing resolution, ensuring government funding through September. This measure avoids a costly shutdown that could have increased fear of recession, which is becoming more prevalent in financial discussions.
Looking ahead, market watchers are closely monitoring the S&P 500’s 200-day moving average (DMA), currently around 5739. With the index closing at 5521 yesterday, an aggressive rally is possible, but caution remains warranted until the DMA is surpassed. Volatility, measured by the VIX, remains a key indicator, and its movement will likely determine whether any potential rally can sustain momentum.
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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