Trump's tariffs trigger rout in almost every corner of the market

As Donald Trump's latest tariff plan came in like a wrecking ball for US stocks, investors found that there were barely any corners of the market left to seek refuge.

The S&P 500 Index on Thursday plunged below a key support level of 5,500 for technical chart watchers, while the Nasdaq 100 is hurtling toward a bear market and the Dow Jones Industrial Average barely evaded a correction at the close. Drilling deeper, sectors that strategists monitor closely for signals of trouble reveal how widespread Thursday's selloff was, with several groups tumbling through crucial support lines.

The tariff announcement that came after Wednesday's market close surprised Wall Street's, which was betting on a much milder outcome. Even sectors that aren't typically seen as sensitive to tariffs tumbled, as fears about an economic recession triggered by the aggressive trade regime spooked traders.

"That's what the sector rotation is telling us," JC O'Hara, chief market technician at Roth Capital Partners said on Thursday. "Earlier this year, when there was a risk-off day, you would still have risk-off sectors higher in trading. Today, basically everything is lower."

Financials are a good example. Banks are not directly exposed to tariffs, but marquee names plummeted, with the KBW Bank Index notching its worst one-day slide since the March 2023 regional banking crisis.

O'Hara, who has been paying attention to the SPDR S&P Bank ETF, noted that the fund dropped below $50 — a concerning milestone in his book.

"We do not need to have banks as leaders in bull markets, but they are able to sniff out structural weakness," the technician said.

Semiconductor companies, one of the main drivers of the stock market's stellar run in the last two years, are standing on shifting sands as well.

The VanEck Semiconductor ETF sank to the lowest level since February 2024, quickly breaching the lows from September, August and April that technical chart analysts have been watching.

Homebuilders, caught between the interplay of high interest rates, fears about economic growth and risks of increased costs from tariffs, tumbled 7.1% to close 17% below the 200-day moving average, marking the largest one-day plunge since June 2020.

"The market has already sent its signal regarding semiconductors and homebuilders — those parts of the market are guilty until proven innocent," said John Kolovos, chief technical strategist at Macro Risk Advisors. "They may be oversold and look more attractive now versus last year, but trading of late remains high risk," he added.

Transportation stocks, seen as an economic bellwether, entered a bear market Thursday. The sector, along with the wider Dow Jones Industrial Average, is sending up a smoke signal for the market.

Meanwhile, consumer discretionary stocks posted the worst day relative to consumer staples since the aftermath of the Sept. 11 terrorist attack, signaling a flight into companies that have defensive characteristics.

"That is about as risk-off as it gets," said Todd Sohn, senior ETF and technical strategist at Strategas Securities. Investors dashed for "cash, cash and more cash, or just really defensive consumer staples," he added.