CaliToday (12/10/2025): Wall Street was sent into a tailspin on Friday after months of relative calm, as President Donald Trump abruptly threatened to impose a sharp increase in tariffs on Chinese imports, shattering market stability and wiping out recent gains.
The sell-off was swift and severe. The S&P 500 plunged 2.7%, marking its worst single-day drop since April. The Dow Jones Industrial Average shed 878 points, a decline of 1.9%, while the tech-heavy Nasdaq Composite suffered the steepest losses, nosediving 3.6%.
The market had been trending slightly higher early in the session until President Trump took to his Truth Social platform to announce he was considering a "massive tariff hike" on Chinese goods. The threat was a direct response to Beijing’s recent move to restrict exports of rare earth minerals—critical components for everything from consumer electronics to advanced jet engines that the United States heavily relies on.
“We have been contacted by many countries that are extremely angry about this trade hostility, which came out of nowhere,” Trump wrote on Truth Social.
He added that there was now "no reason whatsoever" to meet with Chinese President Xi Jinping, walking back a previously agreed-upon meeting that was scheduled to occur during his upcoming visit to South Korea.
A Market-Wide Sell-Off
The escalating tension between the world's two largest economies triggered a broad-based decline, with nearly six out of every seven stocks in the S&P 500 ending the day in the red. The pain was felt across virtually every sector—from technology giants like Nvidia and Apple to smaller companies struggling to navigate the uncertainty of trade and tariff policies.
The sell-off hit an already vulnerable market. Many investors believed U.S. stock prices had become overextended after the S&P 500's remarkable 35% rally from its lows in April. Despite Friday's losses, the index remains near the record high it achieved earlier in the week.
Analysts have been warning that the market is dangerously overvalued, with stock prices rising far faster than corporate earnings. The Artificial Intelligence (AI) sector has been a particular point of concern, with many skeptics drawing parallels to the dot-com bubble of 2000. For the market to become more reasonably priced, either stock prices must fall, or corporate profits must rise significantly.
Major Individual Losses
Among the day's biggest losers was Levi Strauss, which fell 12.6% despite reporting quarterly profits that exceeded expectations. While the iconic jeans maker's full-year forecast was in line with Wall Street estimates, expectations were incredibly high after the stock had already soared 42% year-to-date, leading to a harsh market reaction.
At the closing bell:
S&P 500: Down 182.60 points to 6,552.51
Dow Jones: Down 878.82 points to 45,479.60
Nasdaq: Down 820.20 points to 22,204.43
Oil, Bonds, and Consumer Mood
Volatility extended to other markets. U.S. crude oil prices dropped 4.2% to settle at $58.90 per barrel after a ceasefire between Israel and Hamas took effect in Gaza, easing fears of a potential supply disruption in the Middle East. Brent crude, the international benchmark, fell 3.8% to $62.73 per barrel.
In the bond market, investors fled to safety. The yield on the 10-year U.S. Treasury note fell from 4.14% to 4.05%. The move was also fueled by a new report from the University of Michigan showing that consumer confidence remains weak.
"Concerns over high prices and dimmer outlooks for jobs remain top of mind for consumers," said Joanne Hsu, Director of the Surveys of Consumers. "For now, consumers are not anticipating any significant improvements."
The U.S. job market has slowed enough that the Federal Reserve delivered its first interest rate cut of the year last month. While the Fed is expected to continue cutting rates into next year, Chairman Jerome Powell has warned that the central bank will reverse course if inflation remains stubbornly high, as lower rates can fuel further price increases.
However, one small positive signal emerged from the University of Michigan survey: consumers' expectations for inflation over the next year dipped slightly from 4.7% to 4.6%. While still elevated, the downward trend may give the Fed some breathing room.
International Markets
Global markets also reacted negatively to the renewed trade tensions.
Hong Kong's Hang Seng index fell 1.7%.
France's CAC 40 declined 1.5%.
In a notable exception, South Korea's Kospi index rose 1.7% as it reopened for trading after a public holiday.
