Wall Street Today: DJIA Sheds 2,200 Points and Nasdaq Composite Enters Bear Market as Tariff Troubles Grow

The stock market is in turmoil today as the Dow Jones Industrial Average (DJIA) shed 2,200 points and the Nasdaq Composite officially entered bear market territory. The catalyst for this sell-off? President Donald Trump's announcement of sweeping tariffs that have ignited fears of a global trade war and economic slowdown. The Nasdaq Composite, which has been a bellwether for tech stocks, is down more than 20% from its December high, while the DJIA is teetering on the edge of a correction. The S&P 500, too, has been hammered, down 15.3% from its all-time closing high.



The tariff-induced sell-off has been swift and brutal. The Nasdaq Composite is on track to close in a bear market on Friday, down nearly 4% Friday morning, putting the index more than 20% off its December all-time high. The tech-heavy index was sliding alongside the other major large-cap indexes, with the S&P 500 off about 4% and the Dow down about 3.5%. The Nasdaq will have to close below 16,139.11 for a bear market to be confirmed. The index was recently trading at 15876 after rebounding from its session low below of 15600.

The majority of the more than 3,000 stocks in the Nasdaq were trading in the red on Friday, but mega-cap tech stocks were weighing most heavily on the index. Shares of Apple (AAPL) were down more than 4% after tumbling nearly 10% yesterday, their worst day since March 2020. AI chipmakers Nvidia (NVDA) and Broadcom (AVGO) were both down more than 7%, while EV maker Tesla (TSLA) tumbled nearly 10%.



The impact of these tariffs on key sectors like Big Tech and insurance is significant. For Big Tech, the 34% tariff on U.S. goods will force firms to "rethink pricing, margins, and even geographic focus, as shifting final assembly or diversifying markets becomes more urgent," according to Michael Ashley Schulman, chief investment officer at Running Point Capital. For instance, Apple, which has its major manufacturing production base in China, is down 12% since the new U.S. levies were announced. Similarly, Nvidia, a major player in the AI boom, has shed 13.6% due to worries over slowing spending on data centers.

For the insurance sector, the impact is more indirect but still significant. Insurers and large hospital groups typically negotiate pricing for six months at a time, so there won't be much of an impact in the short-medium term. However, consumers who are buying prescription or over-the-counter medications may feel the impact within weeks because pharmacies usually procure at market pricing. This could lead to increased healthcare costs, which insurers may need to absorb or pass on to consumers, affecting their long-term earnings potential.

To mitigate these risks, investors can adopt several strategies. One approach is to diversify their portfolios to include companies that are less exposed to tariffs or have operations in regions less affected by the trade war. For example, investing in companies that have a strong presence in domestic markets or have already diversified their supply chains away from China could be a prudent move. Additionally, investors can consider sectors that are less sensitive to trade tensions, such as healthcare or utilities, which have more stable revenue streams.

Another strategy is to focus on companies that have strong balance sheets and cash reserves, as they are better positioned to weather the storm of increased costs and potential revenue declines. Companies with robust cash flows can also invest in research and development to innovate and stay competitive despite the tariffs.

Lastly, investors can look for opportunities in sectors that may benefit from the tariffs, such as domestic manufacturing. As the U.S. imposes tariffs on imported goods, there may be a shift towards domestic production, creating opportunities for companies that can capitalize on this trend. For example, the U.S. has charged a 25% tariff on imported pickup trucks since the 1960s, which has encouraged U.S. automakers to concentrate on pickup trucks while largely ceding the market for cheaper, smaller vehicles. This has led to a thriving domestic market for pickup trucks, benefiting companies like Ford and General Motors.

In summary, the recent tariff policies pose significant risks to the long-term earnings potential of key sectors like Big Tech and insurance. However, investors can mitigate these risks by diversifying their portfolios, focusing on companies with strong financials, and looking for opportunities in sectors that may benefit from the tariffs.