Investment Sentiment Frozen by Trump's 'Tariff War'... Nasdaq Down 1.2% [New York Stock Market Briefing]

Major indices of the New York Stock Exchange fluctuated significantly. They started lower on news of high tariffs being imposed on Canada, Mexico, and China, but reduced losses as tariffs on Mexico were deferred.

On the 3rd (local time), the Dow Jones Industrial Average closed at 44,421.91, down 122.75 points (0.28%) from the previous trading day at the New York Stock Exchange (NYSE). The Standard & Poor's (S&P) 500 Index fell 45.96 points (0.76%) to 5,994.57, and the Nasdaq Index dropped 235.49 points (1.2%) to close at 19,391.96.

On the 1st, U.S. President Donald Trump signed an executive order imposing universal tariffs of 25% on Canada and Mexico, and 10% on China. Concerns about rising prices and economic contraction due to the trade war increased the preference for safe assets. As a result, the Dow index expanded its early decline to 1.5% at one point, and the Nasdaq index's decline reached 2.5% at one point.

However, news that the U.S. tariffs on Mexico were deferred for a month was delivered in the morning, causing the Dow index to turn upward at one point during the session, showing indices fluctuating with tariff policy news.

By sector, there was a clear mixed trend. Discretionary consumer goods, materials, and technology fell more than 1%, but essential consumer goods, energy, and utilities rose.

Most big tech stocks fell. This is because the direction of tariffs on China remains uncertain. Tesla fell more than 5%, and Apple dropped 3.39%. Alphabet, Microsoft, and Amazon were also slightly down. Nvidia fell 2.84%, and the Philadelphia Semiconductor Index also dropped 1.82%. Among giant companies with a market capitalization of over $1 trillion, only Meta rose more than 1%.

Experts believe that market volatility will increase for a while due to the uncertainty of Trump's policies. Carol Schleif, Chief Investment Officer (CIO) of BMO Family Office, said, "Trump has seriously maintained his stance of using tariffs as a major means to achieve various goals," adding, "Tariffs will not disappear, and short-term volatility will increase."

Concerns about tariffs have grown, but the real economy's manufacturing sector has entered an expansion phase with expectations for Trump's policies. The Institute for Supply Management (ISM) announced that the manufacturing Purchasing Managers' Index (PMI) recorded 50.9 in January. This is the first expansion phase in 27 months. The final U.S. manufacturing PMI for January by S&P Global also recorded 51.2, exceeding 50 for the first time in seven months.

On this day, West Texas Intermediate (WTI) crude oil for March delivery closed at $72.53 per barrel, up 63 cents (0.87%) from the previous trading day on the New York Mercantile Exchange. This is because the energy sector is being highlighted as a defensive investment.

According to the Chicago Mercantile Exchange (CME) FedWatch Tool, the probability of a 25bp cut in the federal funds rate in the futures market by March fell to 13.5%. It is virtually seen as a rate freeze.

Jin Young-ki, Hankyung.com reporter young71@hankyung.com