Today's Edition
NEW YORK (REUTERS)
Wall Street was set to drop at the open on Monday as fears of a full-blown trade war and its impact on the global economy jolted markets around the world after President Donald Trump levied steep tariffs on Mexico, Canada and China.
Over the weekend, Trump imposed hefty new tariffs of 25% on imports from Mexico and Canada, and 10% on China - which he said may cause "short-term" pain for Americans.
"The uncertainty at this stage is tremendous - not only of how these eventual negotiations will play out, but worries about how this is only the tip of the iceberg and more tariffs are on the horizon," said Yung-Yu Ma, chief investment officer at BMO Wealth Management, in a mailed comment.
"It's likely that the initial tariffs on Canada and Mexico are a negotiating template for what is to come."
Trump said he would talk on Monday with the leaders of Canada and Mexico, which have announced retaliatory tariffs, but downplayed expectations that they would change his mind.
The iShares MSCI Mexico ETF lost 3.6% in premarket trading, while an ETF tracking Canada slipped 2.2%.
At 08:10 a.m. ET, Dow E-minis were down 599 points, or 1.34%, S&P 500 E-minis were down 94.75 points, or 1.56%, and Nasdaq 100 E-minis were down 377.5 points, or 1.75%.
Futures for the economically-sensitive Russell 2000 smallcaps index slumped more than 2%.
Most chip stocks slumped, with industry bellwether Nvidia sliding 4%, while growth stocks Apple fell almost 2% and Microsoft slipped more than 1%.
Legacy automakers - who had been roiled by the impending tariffs worries - dropped sharply. Ford fell 4.2%, while General Motors shed 7.3%.
The Cboe Volatility Index, known as Wall Street's "fear gauge", jumped to its highest level in a week.
Goldman Sachs estimates that every 5-percentage-point increase in the tariff rate would lower the S&P 500's earnings per share by roughly 1% to 2%.
The brokerage said the latest tariff announcements could bring about a reduction in its forecasts for the S&P 500's earnings by roughly 2% to 3%.
Meanwhile, the quarterly earnings remain in full swing, with some prominent companies including Google-parent Alphabet , chipmaker AMD, and drugmaker Eli Lilly reporting results this week.
On Monday, Tyson Foods gained 4% after the meat packer raised its annual sales forecast, while IDEXX Laboratories added 6.9% after the animal diagnostics maker beat fourth-quarter profit and revenue estimates.
Later in the day, a January manufacturing activity reading is expected. The January non-farm payrolls report is also due this week on Friday.
Among other movers, cryptocurrency and blockchain-related stocks dropped as bitcoin prices tumbled in a global risk-off move.
Exchange operator Coinbase and the largest corporate holder of bitcoin, MicroStrategy, tumbled about 7% each.
Triumph Group jumped 34.4% after the aircraft parts maker said investment firms Warburg Pincus and Berkshire Partners have agreed to buy the company in a deal valued at about $3 billion.
