By Stephen Culp
NEW YORK (Reuters) – Wall Street followed world stocks to a lower close on Monday amid fears that U.S. President Donald Trump’s tariffs on Canada, Mexico and China could ignite a global trade war, but U.S. equities reversed some losses after tariffs on Mexican imports were paused.
All three major U.S. stock indexes veered sharply lower after the opening bell but partially recovered by the end of the session on news that tariffs on Mexican imports would be paused for a month after Mexican President Claudia Sheinbaum agreed to reinforce its border with the United States.
Meanwhile, benchmark Treasury yields declined as investors sought safety in U.S. government debt.
“I think you see what we should get very used to, which is this kind of roller coaster of public negotiation around tariffs and other policy,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.
Mayfield added that investors saw the way the issue played out in the open as a continuation of a trend from Trump’s first term and said heightened volatility across asset classes was likely to be more common.
On the economic front, factory data showed U.S. manufacturing activity expanded for the first time since October 2022, and spending on residential construction projects rebounded.
“(These reports) could be taken negatively because they imply that the Fed has another reason not to be lowering rates anytime soon,” said Sam Stovall, chief investment strategist of CFRA Research in New York. “Because if the economy is strengthening, that means that more stimulus would be inflationary.”
The Dow Jones Industrial Average fell 122.75 points, or 0.28%, to 44,421.91, the S&P 500 fell 45.96 points, or 0.76%, to 5,994.57 and the Nasdaq Composite fell 235.49 points, or 1.20%, to 19,391.96.
European shares suffered their biggest drop of the year so far, with automakers leading declines amid fears that Trump’s recent tariff moves would swell into a broader trade war.
MSCI’s gauge of stocks across the globe fell 9.82 points, or 1.13%, to 859.22.
The STOXX 600 index fell 0.87%, while Europe’s broad FTSEurofirst 300 index fell 17.47 points, or 0.81%.
Emerging market stocks fell 18.54 points, or 1.70%, to 1,074.83. MSCI’s broadest index of Asia-Pacific shares outside Japan closed lower by 2.04%, to 564.85, while Japan’s Nikkei fell 1,052.40 points, or 2.66%, to 38,520.09.
Yields on 10-year Treasuries dropped as investors flocked to the safety of U.S. government debt, and short-dated yields rose amid tariff-related inflation fears.
The yield on benchmark U.S. 10-year notes fell 3.4 basis points to 4.533%, from 4.567% late on Friday.
The 30-year bond yield fell 5.3 basis points to 4.7591% from 4.812% late on Friday.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 1.5 basis points to 4.253%, from 4.238% late on Friday.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.56% to 108.90, with the euro down 0.67% at $1.0293.
Against the Japanese yen, the dollar weakened 0.3% to
154.72.
The Mexican peso strengthened 1.26% versus the dollar at 20.421.
The Canadian dollar weakened 0.32% versus the greenback to C$1.46 per dollar.
In cryptocurrencies, bitcoin fell 0.86% to $101,264.13. Ethereum declined 18.24% to $2,712.35.
Oil prices reversed an initial dip to settle higher after the U.S. tariffs on Mexican imports were paused.
U.S. crude rose 0.87% to $73.16 a barrel while Brent rose to $75.96 per barrel, up 0.38% on the day.
Gold touched a record high as tariff jitters prompted safe-haven spending.
Spot gold rose 0.57% to $2,816.98 an ounce. U.S. gold futures rose 0.72% to $2,832.80 an ounce.
(Reporting by Stephen Culp; Additional reporting by Nell Mackenzie, Editing by Amanda Cooper, Angus MacSwan, Wilkl Dunham, Alison Williams and Cynthia Osterman)
