Put the Champagne away—there’s not much to celebrate in the stock market and the bottle will be worth more soon anyway.
President Donald Trump’s latest tariff threats were the final straw to send the S&P 500 into its first correction since October 2023 on Thursday. It’s not only a headache for investors but also Federal Reserve Chair Jerome Powell, who can’t put off dealing with what the levies mean for
monetary policy much longer.
Trump threatened to impose 200% tariffs on alcohol imports from the European Union after the bloc retaliated against U.S. levies on steel and aluminum. The cumulative effect of
tariffs is becoming significant. Economists at Nomura estimate the effective tariff rate for total U.S. imports now stands at 10.1%, up from 2.4% in 2024, and they forecast a further rise to 14%.
That raises the stakes for next week’s Fed policy meeting, even if the central bank is expected to hold rates at their current level. Powell has said the central bank could ignore a one-off increase in prices stemming from tariffs. But the risk is that higher costs get baked into consumer expectations and produce a more sustained inflationary effect.
Traders are currently factoring a roughly 60% chance of three rate cuts or more this year. That’s despite the fact
inflation reports this week suggest the Fed’s preferred gauge—the core personal consumption expenditures index—will tick up to between 2.7% and 2.8% in February from about 2.65% in January.
Everything Powell
says, and does not say, will be hyper analyzed, and investors will focus on the economic projections of Fed officials for whether the inflationary effects of tariffs are turning central bankers hawkish. That really could take the remaining fizz out of the market.
—Adam Clark
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S&P 500 Enters Correction Territory as Trade Wars Take Toll
The S&P 500 closed in correction territory amid heightened uncertainty and fears about the Trump administration’s escalating trade war that sparked a rush to safety. Sinking stocks overshadowed news
that the February producer price index and last week’s initial jobless claims were lower than expected.
- The S&P 500 closed down 1.4% at 5,521.52, more than 10% below its record close on Feb. 19. It was the fastest peak-to-correction shift since the six trading days when the Covid-19 pandemic began in March 2020, according
to Dow Jones Market Data.
- But stock market pullbacks of between 5% and 15% from recent highs have occurred in over one-quarter of all trading days, MarketWatch reported, citing Adam Turnquist, chief technical strategist at LPL Financial. That makes the current 10% drawdown “nothing out of the ordinary,” he said.
- In the past, the index has declined an average of 1.7% in the first month the S&P 500 enters correction territory, but generally rebounds over longer time frames, gaining an average of 2.1% over the following three months and nearly 5% over six months, according to Dow Jones Market Data.
- Treasury Secretary Scott Bessent said the administration is focused on the “real economy,” unconcerned about the recent volatility. Still, Yardeni Research is the latest to cut its S&P 500 year-end forecast, to 6400, from 7000. That still implies the index will finish up 8% from where it started 2025.
What’s Next: While Wall Street forecasters have been lowering market targets, they may not be acting fast enough. Stocks have been selling off so quickly, that, from one perspective, the average Wall Street
forecast has actually gotten more, not less, bullish over the past several weeks, said independent market watcher Jim Paulsen.
—Connor Smith, Ian Salisbury, and Janet H. Cho
Tariffs Battleground Expands to Wine, Champagne, and Alcohol
President Donald Trump threatened to impose 200% tariffs on all wines, Champagnes, and other alcoholic beverages imported from the European Union. That’s in retaliation for the EU’s retaliatory tariffs on $28 billion worth of American goods, including whiskey, starting April 1.
- Trump said on social media that if the EU doesn’t remove its 50% tariff on whiskey, the 200% tariffs on imported alcohol would begin. The EU’s tariffs were triggered by Trump’s 25% tariffs on imported steel and aluminum starting Wednesday.
- Several Canadian provinces yanked U.S. alcohol off store shelves after Trump threatened tariffs on Canadian imports. Shares of Brown-Forman, the maker of Jack Daniel’s whiskey and Finlandia vodka, have dropped 8% since Monday. CEO Lawson Whiting said consumers are trading down to smaller bottles.
- Chris Swonger, CEO and president of the Distilled Spirits Council of the United States, called for “toasts, not tariffs” in a statement to Barron’s. He noted that the industry supports $200 billion in economic activity, including the purchase of 2.8 billion pounds of grains from American farmers.
- Jim Bernau, the founder and president of Oregon winery Willamette Valley Vineyards, told MarketWatch that the uncertainty created by Trump’s tariff war has destabilized the industry and eaten away at profits that the tariffs were meant to protect.
What’s Next:Constellation Brands, which gets the majority of its sales from Mexican lagers including Corona and Modelo Especial, cut its fiscal-year outlook citing uncertainty about Mexico tariffs that start April 2. Constellation would need to raise prices by 12% to offset a 25% increase in tariffs, Roth MKM analyst Bill Kirk said.
—Mackenzie
Tatananni, Evie Liu, and Janet H. Cho
Gold Prices Hit a Record. Investors Should Be Wary.
Gold is still glistening, even as tariff worries drag down other assets such as stocks and cryptocurrencies. The precious metal keeps hitting record highs—but that doesn’t mean now is the time to pile in.
- Spot gold prices topped $3,000 per ounce for the first time late Thursday. Investors have been flocking to the safe haven amid worries that U.S. President Donald Trump’s trade policies could trigger a flare-up in inflation and weigh on growth.
- Wall Street says you should buy in. J.P. Morgan and Goldman Sachs are among the banks urging investors to hold bullion. BNP Paribas just raised its price target, and the world’s largest asset manager BlackRock has been recommending gold for months as a way for investors to diversify their portfolios.
- The recommendations have been spot on so far, but the megarally isn’t without risks. The precious metal has been in a bull market since September 2022, which raises the prospect that it has already priced in much of its potential over the period and is vulnerable to corrections. Early investors could also be tempted to lock in profits.
- Signs that the U.S. economy will weather the latest disruption could also weigh on gold, as it’s often inversely related to GDP growth. When the economy is booming, investors tend to favor riskier assets such as stocks.
What’s Next: A scena
