US stocks tumbled on Tuesday as heightened trade policy uncertainty triggered another volatile session. The Dow Jones Industrial Average shed 478 points, extending losses from the previous day, while the S&P 500 posted back-to-back declines, bringing it closer to correction territory. Investors reacted to shifting tariff policies after President Trump announced plans to double duties on Canadian steel and aluminium, only to later walk back the decision. The abrupt policy moves fuelled investor anxiety, pressuring equity markets and weighing on corporate confidence. Meanwhile, Delta Air Lines’ downward revision of its earnings outlook added to concerns over weakening domestic demand, dragging travel-related stocks lower. As traders braced for further economic data releases, all eyes turned to Wednesday’s inflation report, which could shape expectations for Federal Reserve policy in the months ahead.

Key Takeaways:

  • Dow Drops 478 Points, Extending Sharp Losses: The Dow Jones Industrial Average tumbled 478.23 points, or 1.14%, to close at 41,433.48, adding to Monday’s nearly 900-point drop. The blue-chip index was weighed down by uncertainty surrounding US trade policy after President Donald Trump announced a tariff hike on Canadian steel and aluminium imports, only to later hint at a reversal.
  • S&P 500 Posts Back-to-Back Losses, Nears Correction Territory: The S&P 500 fell 0.76% to 5,572.07, briefly touching levels that put it on the brink of a technical correction—defined as a 10% drop from its record close. The index was up earlier in the session before Trump’s tariff announcement rattled markets. 
  • Nasdaq Stabilises After Monday’s 4% Plunge: The Nasdaq Composite slipped 0.18% to close at 17,436.10, stabilising after suffering its worst one-day drop since September 2022 in the previous session. Tech stocks remained under pressure, though losses were limited compared to Monday’s steep declines. 
  • European Markets Extend Declines as Trade Tensions Mount: European equities fell sharply, dragged lower by escalating trade tensions between the US and Canada. The pan-European Stoxx 600 closed down 1.7%, extending losses from the start of the week. London’s FTSE 100 lost 104.23 points, or 1.21%, to settle at 8,495.99, while France’s CAC 40 dropped 106 points, or 1.31%. Germany’s DAX index declined 292 points, or 1.29%, and Italy’s FTSE MIB slid 528 points, or 1.38%. Shares of Stellantis fell 5% after Trump threatened tariffs on Canadian auto manufacturing, pressuring European automakers with production facilities in the country.
  • Asia-Pacific Markets Track Wall Street Losses, Japan’s GDP Misses Estimates: Asian markets followed Wall Street’s lead, posting broad-based declines. Japan’s Nikkei 225 closed 0.64% lower at 36,793.11, while the Topix index fell 1.11% to 2,670.72. The region’s losses were exacerbated by weak economic data, as Japan’s revised Q4 GDP came in at 2.2% on an annualized basis—missing expectations of 2.8% growth. South Korea’s Kospi fell 1.28% to 2,537.60, and the smaller Kosdaq index declined 0.60% to 721.50. Taiwan’s Taiex dropped 1.73% to 22,071.09 after recovering from an earlier 3% slide. Meanwhile, Australia’s S&P/ASX 200 lost 0.91% to 7,890.10, while Hong Kong’s Hang Seng Index remained flat in late trading.
  • US Treasury Yields Climb Ahead of Inflation Data: Bond markets saw notable movement as investors braced for Wednesday’s key Consumer Price Index (CPI) report. The benchmark 10-year Treasury yield rose nearly 7 basis points to 4.278%, while the 2-year yield bounced 4 basis points higher to 3.937%, recovering from its lowest level since October earlier in the session. 
  • US Job Openings Rise, But Labor Market Faces Headwinds: The latest Job Openings and Labour Turnover Survey (JOLTS) report showed an increase in US job openings, which rose by 232,000 to 7.740 million as of January’s end. This exceeded economists’ expectations of 7.63 million vacancies. However, December’s job openings were revised downward to 7.508 million from the previously reported 7.600 million. While labour demand remains strong, concerns over tariffs and aggressive government spending cuts could lead to a softening labour market in the months ahead.
  • Oil Prices Edge Higher as Dollar Weakens, But Growth Concerns Persist: Crude oil prices posted modest gains, supported by a weaker US dollar, though fears of a potential economic slowdown capped the upside. Brent crude rose 62 cents, or 0.86%, to $69.90 per barrel, while US West Texas Intermediate (WTI) crude climbed 60 cents, or 0.91%, to $66.63 per barrel. Oil markets also reacted to reports that Ukraine has agreed to a 30-day ceasefire, contingent on Russia’s acceptance, in a deal brokered by the US Meanwhile, traders are closely watching OPEC+ plans after the group announced it intends to increase output in April. Analysts suggest that recent price weakness could force OPEC+ to reconsider production hikes, given lingering fears of inflation and economic contraction.

FX Today:

  • Euro Gains as US Growth Concerns Weigh on Dollar: The euro strengthened against the US dollar on Tuesday, with EUR/USD rising 0.82% to close at 1.0923. The pair opened at 1.0834, dipped to a session low of 1.0822, and climbed to a high of 1.0946 as market sentiment shifted in favour of the euro. The rally comes amid increasing concerns over US economic slowdown risks, weakening the dollar’s appeal. Key support lies at 1.0850, with a stronger floor at 1.0800, while resistance is at 1.0950. A move above this level could push EUR/USD toward 1.1000, but failure to break higher may trigger a pullback.
  • British Pound Strengthens, Testing Key Resistance: GBP/USD extended its winning streak, climbing 0.61% to finish at 1.2954. The session saw the pound rise from an opening level of 1.2873, trading between a low of 1.2827 and a high of 1.2966. The pair is approaching a crucial resistance zone near 1.3000, a level that previously capped gains in December. If GBP/USD breaks through, further upside toward 1.3100 is possible. On the downside, support is at 1.2900, followed by 1.2800. While the pound remains in an uptrend, a rejection at resistance could spark short-term selling pressure.
  • Yen Struggles to Hold Gains as Dollar Attempts Recovery: USD/JPY advanced 0.28% to close at 147.67, bouncing from an earlier session low of 146.53. The pair climbed to a high of 148.12 but remains in a broader downtrend after breaking below the critical 150.00 level in recent weeks. Technical resistance stands at 148.50, with stronger hurdles at 150.00. If the pair fails to regain these levels, further declines toward 146.50 and 145.00 could follow. Despite Tuesday’s rebound, the dollar’s momentum remains weak, and another downturn could put additional pressure on USD/JPY.
  • Canadian Dollar Sees Modest Strength as USD/CAD Pulls Back: USD/CAD slipped 0.18% to settle at 1.4407, retreating from its session high of 1.4520. The pair opened at 1.4434 and dropped to a low of 1.4378 before recovering slightly. Despite the pullback, USD/CAD remains above key moving averages, with immediate resistance at 1.4450 and a stronger ceiling at 1.4500. If bearish pressure continues, support at 1.4375 will be critical, with a deeper move potentially testing 1.4300. 
  • Gold Extends Rally as Market Volatility Drives Demand: Gold prices climbed 1.07% on Tuesday, settling at $2,919 after hitting a session high of $2,922.22. The metal initially dipped to $2,880 before recovering strongly as investors sought safety amid ongoing trade tensions. Gold remains in a well-defined uptrend, trading comfortably above its 50-day SMA at $2,810 and 100-day SMA at $2,735. Immediate resistance stands at $2,930, with a break above opening the door for a test of $3,000. On the downside, support is seen at $2,900, with a sharper pullback potentially testing $2,850. Despite the strong rally, profit-taking at resistance levels could lead to near-term consolidation.

Market Movers:

  • Delta Air Lines Sinks on Lowered Earnings Outlook: Delta Air Lines tumbled 7.3% after the company slashed its first-quarter revenue and earnings forecast, citing weaker US travel demand. 
  • Verizon Falls on Weak Wireless Growth Expectations: Shares of Verizon slid 6.6% after the telecom giant warned that first-quarter wireless subscriber growth would be weaker than anticipated. 
  • Southwest Airlines Soars on New Revenue Strategy: Southwest Airlines jumped 8.3% after announcing plans to charge for checked bags and introduce a basic economy fare. 
  • Kohl’s Tanks as Weak Guidance Shocks Investors: Kohl’s shares plunged 24.1% after the retailer issued dismal forward guidance alongside weak fourth-quarter results. 
  • Reddit Surges on Analyst Optimism: Reddit shares soared 14.4% after Loop Capital called the stock “the biggest upside potential relative to Street estimates” in its coverage universe. Analysts pointed to a recent pullback as a strong buying opportunity, lifting investor sentiment.
  • Teradyne Crashes After Slashing Revenue Guidance: Teradyne shares collapsed 17.1% after the company unexpectedly lowered its second-quarter revenue outlook. 

As markets closed on Tuesday, volatility remained high, with major indices under pressure amid escalating trade tensions. The Dow extended its losses, while the S&P 500 moved closer to correction territory, and the Nasdaq struggled to recover from Monday’s sharp decline. Investors reacted to shifting tariff policies, as President Trump’s announcement of increased duties on Canadian steel and aluminium—followed by a partial reversal—added to uncertainty. Meanwhile, Treasury yields climbed as investors awaited key inflation data, which could influence expectations for Federal Reserve policy.