Stock Market Update: S&P 500 and Nasdaq Drop While Dow Rebounds Amid Trump Tariff Developments

Date: February 3, 2025

By: Rian Howlett, Karen Friar, and Ines Ferré

The U.S. stock market witnessed notable activity on Monday, with major indices responding to recent tariff announcements from the Trump administration. The Nasdaq Composite, heavily influenced by technology stocks, fell by 1.2%, while the S&P 500 decreased by roughly 0.7%. Conversely, the Dow Jones Industrial Average managed to claw back from earlier losses, closing down just 0.3%.

Tariff Rollout Pressures Market

Investors reacted to news of upcoming tariffs set to take effect on imports from Canada and China, which included substantial duties of 25% on Canadian goods and 10% on Chinese imports. The market was poised for a tumultuous day when President Trump announced the delay of tariffs on Mexican imports by one month, offering a glimmer of hope amid growing concerns regarding trade tensions.

President’s Trump’s negotiations with Mexican President Claudia Sheinbaum proved pivotal. Following a morning discussion, Trump confirmed that Mexico would deploy 10,000 soldiers to secure its border, thus postponing the tariffs initially slated to commence on Tuesday. This decision momentarily eased some market anxiety surrounding escalating trade tensions.

Market Reactions

The tech sector faced significant setbacks, with shares of major companies such as Nvidia, Apple, and Tesla each suffering declines of over 2.5%. Consumer discretionary stocks were also adversely impacted as investors grew increasingly wary of potential tariff effects on automakers and other sectors.

In light of these developments, the U.S. dollar index saw fluctuations, dipping after previously trading near two-year highs. The oil market also experienced volatility, with West Texas Intermediate futures reflecting a contraction from earlier gains exceeding 2%.

Canada’s Response

As the market awaited further news, Canadian Prime Minister Justin Trudeau announced that Canada would implement a $1.3 billion border plan and would pause tariffs on American goods for at least a month. Trudeau and Trump had a phone conversation later in the day, aiming to negotiate a situation similar to the deal struck with Mexico.

“I just had a good call with President Trump," Trudeau wrote on social media platform X (formerly Twitter), emphasizing Canada’s commitment to enhanced border security and cooperation.

Conclusion

The overall market sentiment on Monday was decidedly cautious, with investors closely monitoring negotiations and policy changes from both the U.S. and its trading partners. The prospect of escalating trade tensions continues to weigh heavily on market performance, while the stock movements across major indices reflect the ongoing uncertainty surrounding tariffs and international trade dynamics.

As the week progresses, market participants will remain on high alert for further announcements from the Trump administration, particularly regarding tariffs set to go into effect on Canadian imports.