The rally turned into a roller-coaster.
After shooting out of the gate Tuesday, North American stock markets stumbled for the fourth straight day, as the threat of an escalating trade war between China and the U.S. weighed on traders just hours before “reciprocal” tariffs from U.S. President Donald Trump go into effect.
In Toronto, the S&P TSX composite index jumped as soon at it opened, and rose as much as two per cent. But by early afternoon, it was back in the red, and closed trading down by 1.5 per cent, wiping out roughly $60 billion in stock value.
In New York, the S&P 500, Nasdaq composite and Dow Jones industrial average all rose by more than three per cent in early trading, but started to slump by early afternoon, wobbling back and forth several times between a loss and a gain.
By market close, the S&P 500 was down by 1.6 per cent, the Dow was down by just under one per cent, and the tech-heavy Nasdaq fell by 2.2 per cent.
The S&P 500 fall alone wiped out more than $600 billion (U.S.) in stock value.
Even market professionals were shaking their heads.
“It’s not a time for weak stomachs,” said Andrew Kelvin, an investment strategist at TD Securities.
Even during previous crashes which were worse by some standards, the current market turmoil is more difficult because of the sheer unpredictability, Kelvin said.
With every Trump post on Truth Social, or every statement from the White House, markets can rise or fall. And even if tariffs were all eliminated tomorrow, traders would likely be inclined to look a gift horse in the mouth, Kelvin added.
“Markets are really eager to cling to any shred of good news,” said Kelvin. “But there’s always going to be thing lingering notion of ‘how long does this persist?’”
White House spokesperson Karoline Leavitt spooked markets with a mid-afternoon confirmation that a 104 per cent tariff on Chinese imports would be going into effect at midnight.
“If China reaches out to make a deal, (Trump) will be incredibly gracious, but he’s going to do what’s best for the American people,” Leavitt said.
China shot back, with the country’s foreign ministry blasting the tariffs.
“Trade and tariff wars have no winners, and protectionism leads nowhere. We Chinese are not troublemakers, but we will not flinch when trouble comes our way. Intimidation, threat and blackmail are not the right way to engage with China,” said a spokesperson for the Chinese Foreign Ministry.
The loonie was also on a wild ride, rising as high as 70.73 cents (U.S.), and sinking as low as 70.08 cents, averaging 70.44 cents on the day, up from 70.29 Monday.
Wall Street’s so-called “fear index” was also bouncing around Tuesday.
The Chicago Board Options Exchange’s volatility index, usually known by its ticker symbol VIX, was down as much as 18.4 per cent, but the fear factor crept back up by the afternoon, and it soared as high as 53.39 points, a rise of 15.8 per cent.
By 4:30 p.m. it was at 51.97 points, a rise of 10.6 per cent. The VIX is based on futures trading, and is a gauge of expected volatility in the broad-based S&P 500 composite index. The higher it goes, the greater the expected volatility.
Veteran market strategist David Prince, former CEO of Harbinger Capital Markets Research, said trading driven by computer algorithms, as well as day-trading retail investors, is also compounding the swings.
“It’s had a huge impact on the market,” said Prince. “There’s never been a market cycle that has as much computerization as we have now, bar none.
Overnight in Asia, markets had risen. Hong Kong’s Hang Seng index was up 1.5 per cent, while Tokyo’s Nikkei 225 rose six per cent.
Shortly before markets opened in North America, Trump posted on Truth Social that he’d spoken on the phone with South Korea’s acting president and that “things are looking good” for the prospect of a trade deal between the two countries.
Trump also said other countries have reached out about reaching an agreement on tariffs imposed by the U.S.
“We are likewise dealing with many other countries, all of whom want to make a deal with the United States,” Trump claimed.
He also claimed that China had yet to reach out.
“China also wants to make a deal, badly, but they don’t know how to get it started. We are waiting for their call,” Trump wrote.
In an interview with Fox News Tuesday, U.S. treasury secretary Scott Bessent called China’s tariff retaliation a “big mistake.”
China has said it will “fight to the end” and take countermeasures against the U.S. to safeguard its own interests after Trump threatened an additional 50 per cent tariff on Chinese imports.
Trump’s threat came after China imposed 34 per cent counter-tariffs Friday in the wake of last week’s “reciprocal tariffs” introduced by Trump on countries around the world.
Those tariffs go into effect at 12:01 a.m. Wednesday.
