Wall Street’s ‘week of drama’ on Trump chaos: Tariff hikes to Mag 7 group—5 key factors that moved US stock market

Wall Street's ‘week of drama’ on Trump chaos: US stocks logged a sharp rebound in the previous session after the benchmark S&P 500 entered the correction phase earlier this week with a massive $5 trillion plunge. 

Wall Street investors hunted for bargains at the end of the tumultuous week. However, the fallout from US President Donald Trump’s tariff hikes and political battles continued to shake global markets and rattle US consumers.

Trump's escalating trade war fueled recession fears and doused risk appetite. The moves capped a week of drama, including Trump’s on-and-off-again tariffs, recession calls, geopolitical talks, and concerns over a US government shutdown. US stocks recovered on Friday after a broad tariff-led selloff. 

Also Read: Wall Street Today: Nasdaq rallies 3% on Mag 7; S&P 500 set for best day since elections, on track for 4th weekly loss

Wall Street's performance last week

On Friday, the S&P 500 and Nasdaq logged their biggest one-day percentage gains since November 6, the day after the US presidential elections. Even with Friday's bounce, the S&P 500 and Nasdaq notched their fourth straight weekly losses— the longest such streak since August. 

The Dow also posted a Friday-to-Friday dip. On Friday, the Dow Jones Industrial Average rose 674.62 points, or 1.65 per cent, to 41,488.19. The S&P 500 advanced 117.42 points, or 2.13 per cent, to 5,638.94, and the Nasdaq Composite gained 451.07 points, or 2.61 per cent, at 17,754.09.

US stocks were down around two per cent last week, even after the rebound. The S&P 500 staged its biggest bounce from a loss in seven months. Data showing a slide in consumer confidence also did not prevent the rebound following a selloff that culminated in a 10 per cent plunge of the US equity benchmark from its peak.

On March 6, the Nasdaq index confirmed it was in a correction by closing 10.4 per cent lower than its all-time closing high reached on December 16. It took just 16 trading sessions for US stocks to hit a correction. 

According to CFRA Research, in the prior 24 instances when stocks have fallen 10 per cent from a record but avoided a bear market, it has taken eight months to reclaim a record high. That would leave the February 19 high intact until mid-October. 

According to Bloomberg, US stocks just posted their worst start for the new administration since the global financial crisis. The US dollar is headed for its biggest post-inauguration loss since Richard Nixon began his second term in 1973. The dollar was hit for a second week, extending its March loss to 2.5 per cent.

Also Read: Global markets today: S&P 500, Nasdaq crash up to 2%; is a bigger correction coming in the US stock market?
 

Wall Street crashes, then rebounds! Top five factors that drove the US stock market:

1.Donald Trump's tariff chaos

On Wednesday, Trump imposed 25 per cent tariffs on all steel and aluminium imports. That led to retaliations by Canada and the EU, which announced plans to tax American whiskey 50 per cent. On Thursday, Trump promised a 200 per cent tax on all European wine, spirits, and other alcoholic beverages.

Trump has separately placed 25 per cent tariffs on all imports from Mexico and Canada. These tariffs will go into full effect in April after two months of various suspensions. Canada's oil and other energy products will be charged a lower 10 per cent. 

Trump also imposed a 20 per cent tax on imports from China to stop fentanyl production. He plans reciprocal tariffs on the EU, Brazil, South Korea, and a few others starting April 2, and import taxes on autos, computer chips, pharma drugs, copper, and lumber. However, on Friday, Trump did not speak on tariffs, the absence of which drove a positive shift in the US stock market sentiment.

2.Magnificent Seven (Mag 7) Group

Earlier this year, the elite Magnificent Seven group of stocks—the top seven US technology giants, including Tesla—entered correction territory, 10 per cent of their record highs. China's cheaper artificial intelligence (AI) chatbot, DeepSeek, threatened Nvidia and other US tech giants, triggering a massive selloff.

According to Bloomberg, three-quarters of the S&P 500's losses are due to declines in the Mag seven tech stocks, which include Nvidia and Tesla. However, on Friday, the recently battered tech megacaps led gains, with Nvidia and Tesla up at least 3.8 per cent. The tech-heavy Nasdaq 100 climbed 2.5 per cent. 

Every one of the Magnificent seven momentum stocks advanced, although six of them remain down on the year. Chips were outperformers, rising 3.3 per cent, while the FANG group of tech-adjacent momentum stocks advanced 3.2 per cent.

Also Read: ’Magnificent Seven’ Review: Nvidia soars 183% YTD to lead US tech pack in 2024; Meta ranks second; Full list

Tesla rose 3.9 per cent following a report on the electric vehicle maker's plans to make a lower-cost version of its best-selling Model Y in Shanghai, aiming to regain ground lost during a price war in its second-largest market.

Nvidia's shares jumped 5.3 per cent ahead of next week's GPU Technology Conference (GTC), which is expected to culminate in a highly anticipated keynote address from Nvidia CEO Jensen Huang.

3.US Recession Fears

According to some Wall Street analysts, the US recession is expected to occur in the first half of 2025, setting the stage for the most significant economic disruption since the global financial crisis of 2008. US economic growth is stalling due to still-elevated interest rates and inflationary pressures.

“The cracks in the US economy are deepening. Trump’s on-off and erratic tariff policies have heightened uncertainty for businesses and investors. The damage has already been done," said Nigel Green, CEO, deVere Group, a global financial advisory and asset management organization.

Also Read: Inflation vs Growth: What’s bothering US consumers the most ahead of US Fed policy meeting? Survey reveals..

Market waves of uncertainty have taken their toll, investor confidence has been battered, and businesses are scrambling to mitigate costs they never asked for. Global trade flows are adapting to a world with the US becoming no longer the dominant, reliable player it once was," added Green.

4.Shift to safe-haven assets

The growth and inflation uncertainties sent investors fleeing from equities in favour of safe-haven assets, lifting spot gold prices above the $3,000 per ounce level for the first time on Friday. Analysts observed that wary traders took cover in havens again during the week, like gold and government bonds. 

According to Bloomberg, the precious metal has rallied 10 per cent since Trump’s January inauguration — the best start to a presidential cycle since Jimmy Carter’s term began in 1977. The precious metal is up close to 14 per cent year-to-date as trade wars and growth worries boost the safe-haven appeal. 

5.US Treasury yields

US Treasury yields rose as the stock market recovery reduced safe-haven demand for US government debt. The yield on benchmark US 10-year notes rose 4.2 basis points to 4.318 per cent, from 4.276 per cent late on Thursday, while the 30-year bond yield rose 2.9 basis points to 4.6248 per cent.

According to Reuters, the two-year note yield, which typically follows US Federal Reserve interest rate expectations, rose seven basis points to 4.023 per cent late Thursday from 3.953 per cent. Treasuries are up 2.5 per cent over the stretch, a gain not seen during the cycle since Bill Clinton in 1993.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.

With inputs from Associated Press, Bloomberg, and Reuters