Stocks plunged lower on Friday after President Donald Trump escalated tariff threats against China, one of the nation's largest origin country for countless numbers of goods, accusing Beijing of "becoming very hostile" regarding restrictions on rare earth metals.
The Dow Jones Industrial Average (NYSE: DIA) fell nearly 880 points on Friday to close at 45,479.60, while the broader market S&P 500 Index (NYSE: SPY) declined over 2.7% to end the session at 6,552.51. The tech-heavy Nasdaq Composite (NASDAQ: QQQ) also saw large losses throughout the session, dropping over 3.5% to close at 22,204.43.
President Trump captured much of the market's attention on Friday after posting on his Truth Social platform that "now there seems to be no reason" to meet with President Xi in South Korea in two weeks, claiming that China was holding the world "captive" by increasing export control over its rare earth metal resources.
"One of the policies that we are calculating at this moment is a massive increase of tariffs on Chinese products coming into the United States of America," Trump wrote in the post. "There are many other countermeasures that are, likewise, under serious consideration."
Shares of MP Materials (NYSE: MP), USA Rare Earth (NASDAQ: USAR), Energy Fuels (NYSE: UUUU) and NioCorp Developments (NASDAQ: NB) all saw double-digit gains following Trump's announcement on Friday. Meanwhile, the CBOE Volatility Index (VIX), one of the key measures of investor sentiment, jumped above 22 on Friday in a move that signals market participants are making more trades in the options market to hedge their portfolios against a possible drop in the S&P 500.
The treat of more tariffs on China also comes as the U.S. government shutdown extended into its 10th day on Friday, with the Senate failing for a seventh time on Thursday to pass a stopgap funding measure. Currently, both Republicans and Democrats have not made any meaningful moves towards a compromise.
On the economic front, consumer sentiment remained little changed in early October, the University of Michigan's closely watched survey showed Friday, even as labor market and inflation concerns lingered across demographics.
The month's preliminary reading came in at 55.0, down just 0.2% from the month but 22% below where the index stood a year ago. The current conditions index rose 1% month-to-month to 61.0, while the expectations index edged 1% lower to 51.2.
"Pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers' minds," said Joanne Hsu, director of the Surveys of Consumers, in a statement. "Meanwhile, interviews reveal little evidence that the ongoing federal government shutdown has moved consumers' views of the economy thus far."
Friday's declines erased the S&P 500's gain for the week, as the benchmark lost over 2%. The Dow and Nasdaq each saw their own losses as well, falling 2.7% and 2.5%, respectively, for the week.
Despite the session's woes, UBS analyst Burkhard Varnholt believes the current bull market still has plenty of room to run as it crosses its third anniversary on Sunday.
"Three years ago, the current bull market emerged from the preceding bear market," wrote Varnholt, senior financial market advisor at UBS Switzerland AG, in a note. "In 2022, soaring electricity prices in Europe, Russia's invasion of Ukraine, global supply chain inflation, and recession fears caused markets to plunge by more than 20 percent. On 12 October 2022, the S&P 500 stood at 3,591 points. Today, three years later, it trades at nearly twice that level."
"We believe the current bull market remains intact," he added. "We also believe that the present AI rally is not a market bubble. Rather, we expect that this decade's technological surge will trigger irreversible socioeconomic developments."