Written by Linh Tran, Market Analyst at XS.com
The S&P 500 ended yesterday’s trading session down 1.76% as investors reacted negatively to continued weak economic data and escalating trade tensions due to the U.S.’s increasing tariff policies.
According to the latest data, the S&P Global Manufacturing PMI and ISM Manufacturing PMI for February were released yesterday. While the S&P Global Manufacturing PMI showed growth compared to the previous month, the ISM Manufacturing PMI reflected a slowdown. These figures are still not strong enough to signal a positive turnaround for the overall economic outlook. On the contrary, concerns about economic growth prospects in Q1 2025 remain gloomy, putting pressure on the stock market.
The escalating tariff policies were arguably the biggest blow to risk assets yesterday.
Yesterday, the U.S. President signed an executive order titled “Further Amending Duties Addressing the Synthetic Opioid Supply Chain in the People’s Republic of China,” which raised tariffs on Chinese imports from 10% to 20%. Additionally, there were no signs of delays in the planned 25% tariffs on imports from Mexico and Canada, which are set to take effect today. This move immediately had a negative impact on market sentiment.
The current tariff policies have placed significant pressure on businesses reliant on global supply chains, particularly in the technology, industrial, and manufacturing sectors. Yesterday, Nvidia’s stock saw a sharp decline, wiping out its recovery efforts from last weekend. The broad-based sell-off across the stock market pushed the S&P 500 into negative territory.
Beyond economic and trade factors, the market was also affected by geopolitical risks. Last week’s confrontation between President Trump and Ukrainian President Volodymyr Zelensky raised concerns and uncertainty about renewed geopolitical risks. Yesterday, President Trump also announced a temporary suspension of military aid to Ukraine—potentially one of the reasons investors fled the stock market.
A “risk-off” sentiment dominated the market as investors worried about the impact of tariffs and political instability. Investment legend Warren Buffett, who has maintained a defensive position for nearly a year, also warned that tariffs could directly impact American consumers’ wallets, reducing purchasing power and putting pressure on businesses.
This week, the market will turn its attention to U.S. employment data and the non-farm payroll report. Any signs of economic strength could have a positive impact on the S&P 500, and vice versa.