The Dow Jones Industrial Average plunged sharply on Wednesday as Wall Street braced for the possibility of a Donald Trump victory in the upcoming presidential election. Investors have grown increasingly concerned about the potential impact of a Trump presidency on the economy and financial markets. All three major indexes experienced significant losses, with the tech-heavy Nasdaq Composite leading the decline, falling 1.6%.
The S&P 500 and Dow both dropped around 1%, with the Dow shedding just over 400 points. At one point during the day, the Dow was down more than 600 points, marking the third consecutive day of losses for US markets. The selloff hit the tech sector particularly hard, with companies like Nvidia and Apple seeing their shares drop by 2.8% and 2.2%, respectively, ahead of their earnings reports next week.
Investors are closely monitoring these results to assess whether substantial investments in artificial intelligence have translated into improved financial performance. Steven Ricchiuto, chief US economist at Mizuho Securities, explained in a note, “The logic here is very simple: Candidate Trump has called for a significant increase in import tariffs to revive domestic manufacturing.
Dow plunges amid election concerns
These tariffs are seen as immediately raising the price of consumer goods and, in the process, reversing the goods deflation that has helped pull inflation back towards the Fed’s 2% target.”
Trump’s policy proposals, if implemented, are also expected to lead to a substantial increase in government borrowing compared to the plans put forth by Vice President Kamala Harris. This would make investing in government-issued securities riskier, prompting investors to demand higher interest rates to hold US debt. Treasury yields continued to rise, with the 10-year note briefly surpassing 4.25%, its highest level since July.
This surge in yields has further pressured stocks and heightened anxiety among stock investors. José Torres, senior economist at Interactive Brokers, cautioned in a note, “The equity market is extremely fragile considering the headwinds that are lurking right around the corner. Earnings expectations are buoyant for next year, which increases the importance of forward guidance rather than past results.”
The current market environment suggests that volatility will persist in the near future, with Torres warning of the potential for further yield curve steepening and increased market turbulence ahead.
As the election draws closer, investors will be closely watching polls and any developments that could impact the outcome. The uncertainty surrounding the election has already taken a toll on the stock market, and further volatility is expected in the coming weeks.
