Dow sinks, Nasdaq flips positive as Trump tariffs take effect, trade war escalates

Trump-based euphoria has evaporated from the stock market as recent tariff escalations and disappointing data spark growth fears. Beyond the broader markets, certain sectors initially expected to perform well under a Trump administration have also lagged since the election.

Immediately following Trump’s win, small caps surged, with the Russell 2000 (^RUT) outperforming the leading market indexes. But the rally was short-lived, and the index is now down about 8% since its Nov. 5 close.

Companies within the small-cap index, which include regional banks and smaller domestic players, were expected to benefit from anticipated policies from the Trump administration, such as lower taxes and deregulation. However, those policies have yet to materialize as tariffs remain the administration’s current priority.

Meanwhile, sectors like Energy (XLE) and Industrials (XLI) also jumped in the aftermath of Trump’s victory due to expectations of more M&A, a steeper yield curve, and less regulation. Both have fallen around 3%.

Financials (XLF) have been the lone exception, up about 7% since Nov. 5.

And bitcoin (BTC-USD), one of the biggest beneficiaries of the post-election rally, has perhaps lost the most momentum after first exceeding $100,000 a coin late last year. The largest cryptocurrency is now trading at around $85,000, down about 22% from an all-time high of just above $109,000 in mid-January.

In individual stock moves, Trump Media & Technology Group stock (DJT), which had surged as much as 25% after Trump clinched victory over former Vice President Kamala Harris, is now down about 50% from that time period. Heading into the election, strategists had categorized the stock as a bet on the election given its meme-like trading patterns.

DJT is the parent company of Trump’s social media platform, Truth Social, which he frequently uses to communicate with the public.

And Elon Musk’s Tesla (TSLA) has seen brutal trading action in recent weeks. The stock, set to close under its 200-day moving average for the first time since August 2024, is down over 30% since the start of the year.

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