Investing.com — U.S. stocks suffered heavy losses for a second straight day Friday after China hit back with new tariffs on American goods, fueling concerns that President Donald Trump’s escalating trade dispute could tip the global economy into recession.
The sank 2,231 points, or 5.5%, to 38,314.86—its steepest drop since the depths of the pandemic in June 2020. The back-to-back losses, including Thursday’s 1,679-point fall, marked the first time the index has ever lost more than 1,500 points on consecutive days.
The tumbled nearly 6% to 5,074.08, its sharpest one-day slide since March 2020. After shedding almost 5% the previous session, the benchmark is now down more than 17% from its recent peak.
The , which is heavily exposed to China through tech companies, fell 5.8% to 15,587.79, deepening its two-day loss to nearly 12%. With the index now down 22% from its December high, it has officially entered bear market territory.
Losses were widespread, with just 14 S&P 500 components finishing higher on the day.
Technology names bore the brunt of the selling. Apple shares (NASDAQ:) sank 7%, bringing their weekly decline to 13%. Nvidia (NASDAQ:) also dropped 7%, while Tesla (NASDAQ:) slid 10%, as all three face significant risk from China’s retaliatory measures.
Outside of tech, major exporters to China like Boeing (NYSE:) and Caterpillar (NYSE:) were hit hard, falling 9% and 6%, respectively.
The S&P 500 ended the week down 9%, its worst performance since the pandemic-driven selloff in early 2020.
Key few days ahead
Markets enter the week on edge as investors digest the fallout from President Trump’s sweeping new tariff measures and watch for potential responses from key trading partners.
The new policy, set to take effect on April 9, includes a 10% baseline tariff on all imports and steeper duties on dozens of countries—representing the most aggressive U.S. trade barriers in over a century.
The escalation continued Friday when China responded with retaliatory tariffs of 34% on U.S. goods. The rising trade tensions have led investors to reassess their economic and earnings outlooks, with JPMorgan increasing its estimate for the risk of a global recession this year to 60%, up from 40%.
While some market participants still hope Trump will strike deals with certain countries to scale back parts of the tariff regime, skepticism remains. Many doubt the president is willing to make significant concessions.
Against this backdrop, attention is also turning to key economic data releases. The Federal Reserve will publish minutes from its March policy meeting this week, which could offer further insight into how officials are interpreting the economic risks tied to trade policy.
In March, the Fed kept rates unchanged but raised its inflation forecast and trimmed growth projections, citing tariffs as a major source of uncertainty.
Investors are also bracing for an increase in consumer prices. February’s CPI rose just 0.2%, but expectations point to a higher print this time. The FOMC sees core PCE inflation at a minimum of 2.5%, with the median estimate at 2.7% and the upper bound reaching 3.4%.
Jeffrey Palma, head of multi-asset solutions at Cohen & Steers (NYSE:), stressed the importance of some calm returning to markets.
“We’ve had two really, really big days in terms of sharp market moves,” Palma said. “What we really don’t want to see is that starts to create some vicious cycle that itself destabilizes the financial system.”
New Producer Price Index (PPI) and Michigan consumer sentiment reports are also due this week.
Q1 earnings season set to kick off
Adding to what is already shaping up to be a high-stakes week, the new earnings season will begin in the coming days.
As usual, major Wall Street banks will lead off, with BlackRock (NYSE:), JPMorgan Chase & Co (NYSE:), and Wells Fargo & Company (NYSE:) set to report on Friday.
Ahead of that, Delta Air Lines (NYSE:) will release its full first-quarter results before the market opens on Wednesday, following its March 10 pre-announcement that lowered its revenue outlook for the quarter.
What analysts are saying about U.S. stocks
Morgan Stanley: “Last Thursday, we offered 5100-5200 as the next area of technical support for the S&P 500. With the market quickly trading there on Friday and overnight futures down another 3-5% so far, our thoughts turn to the next area of support, which lies closer to the 200-week moving average, or 4700. Valuations also offer better support at that price so investors should be prepared for another 7-8% potential downside from Friday’s close if there is no line of sight to a less severe trade environment and the Fed remains firmly on hold.”
BTIG: “In the last 40 years, there have only been two sustained breaks below the 200 Week M.A. One was during the ’00-’02 bear market, one during ’08-’09 bear market. Even the crash of ’87 bottomed on its 200 week M.A. We don’t know if we get there, but if we do history suggests it holds, at least initially.”
Evercore ISI: “We reduce our S&P 500 Year End 2025 Price Target to 5,600 (from 6,800) and reduce our 2025 EPSe to $255 (from $263).”
“The prolonged Uncertainty has raised asset Volatility, damaged confidence and increased the odds “Soft” data eventually “infects” the “Hard”, causing Stagflation or outright Recession. While Trump’s dealmaking will be tested and could produce wins – on Tariffs, conflict resolution in Ukraine and the Middle East, and a “Big Beautiful Bill” that addresses Taxes and the Debt Ceiling – retaliation, escalation and negative feedback loops are also possible.”
JPMorgan: “We believe that one should stay cautious on risk, as the above setup is likely to keep implying softer S&P500, Defensive equity internals, and lower bond yields, with further curve flattening. In order to be sustainably buying equities, beyond just technical bounces, we would need to see trade newsflow to settle – for retaliations to be out of the way, also a reversal in fiscal consolidation drive, where certain departures from current administration would need to happen, and would need to see Fed capitulation, but that is likely only after the payrolls falter. Ultimately, we will transition to a more forceful Fed support, driving the re-steepening of the yield curve, and bullish equity market behaviour, but that is not likely before 2H. “
RBC Capital Markets: “We’ve been signaling in our recent research reports that if the early-2025 drawdown in the S&P 500 couldn’t be contained within the typical garden-variety pullback of 10%, or fairly close to its mid- March 2025 low, we thought our previous bear case of 5,550 for the S&P 500 at YE 2025 would be more likely to transpire than our previous base case of 6,200, which was serving as our official price target.
That condition was triggered in the aftermath of the Rose Garden tariff announcements on Thursday, when the S&P 500 fell sharply and broke meaningfully through its mid-March-2025 low, closing more than 12% below its February-2025 high. In light of this development, as well as our sense that the Rose Garden tariffs didn’t do nearly enough to resolve the uncertainty that has seemingly paralyzed parts of the business community, we are lowering our YE 2025 price target to 5,550 from 6,200 – essentially making our old bear case our new base case.”
