Stocks came well off session lows as the Mexican peso erased losses after President Claudia Sheinbaum said tariffs would be delayed for one month after a conversation with President Donald Trump on Monday.
Following a slide that approached 2% earlier Monday, the S&P 500 dropped 0.8%. Defensive groups led gains, while carmakers, semiconductor shares and industrial companies remained under pressure.
The dollar almost wiped a rally that was earlier shaping up to be the biggest since the onset of the pandemic. The peso climbed 1.1%, while Canada’s loonie pared its decline to 0.4%.
The Bloomberg Dollar Spot Index rose 0.3%. The Mexican peso added 0.1%. The Canadian dollar fell 0.4%. The yield on 10-year Treasuries declined two basis points to 4.51%.
“At this point, we are doubtful that the tariffs on Canada and Mexico will be long lasting, if enacted at all,” said Keith Lerner and Michael Skordeles at Truist Advisory Services.
“Nevertheless, until there is clarity on the duration or magnitude of tariffs, these actions inject uncertainty into supply chains and pricing for many companies — large and small — across North America,” they explained.
President Trump’s move to invoke an emergency and impose tariffs on Canada, Mexico and China is the most extensive act of protectionism taken by a U.S. president in almost a century.
While both Canada and Mexico have pledged to retaliate if Trump follows through on his threats, President Sheinbaum posterd on social media that “we had a good conversation with Trump.”
“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 at BMO Wealth Management.
“While we believe that tariffs are primarily a negotiating tool for President Trump, it’s very difficult to say whether these tariffs will be short-lived or if there is a scenario where a deal is struck that reduces the tariffs,” Ma added.
Stocks
- The S&P 500 fell 0.8% as of 12:50 p.m. New York time.
- The Nasdaq 100 fell 1.2%.
- The Dow Jones Industrial Average fell 0.3%.
- The Russell 2000 Index fell 1.2%.
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