Market sell-off: Trump post cuts $2 trillion from stocks in one day

Friday morning the S&P500 was less than a few points away from another all-time record. Then, after one social media post from President Donald Trump, $2 trillion in market value was wiped out.

The unraveling shows the impact the president's one-man trade policies continue to have on the fate of the global economy.

Trump wrote on his Truth Social platform at 10:57 a.m. ET that China “became very hostile” to the rest of the world, especially when it comes to control of rare earth elements. He accused China of holding the world “captive” because of its “monopoly” on these crucial resources.

The main part the stock market responded to in the 500-word Trump post was this: “One of the policies we are currently calculating is a massive increase in tariffs on Chinese products entering the United States of America.”

That's all it took.

Bespoke Investment Group calculates that that one post wiped out about $2 trillion in value from the U.S. stock market. The S&P 500 lost 2.7% as the closing bell sounded on the New York Stock Exchange. It was the worst performance since early April, when the stock market was in the grip of a back-to-back sell-off following Trump's so-called Liberation Day rollout of higher-than-expected tariffs on every country in the world.

The Nasdaq Compositehome to the tech companies that rely on trade with China, fell 3.56%, also the worst performance since April. The Nasdaq hit an all-time high during Friday's session before the Trump post.

The Dow Jones Industrial Average fell 879 points, or 1.9% for its worst performance since May. The Russell 2000 small-cap benchmark lost 3%.

Although the Trump administration's trade negotiations with China have been moving at a much slower pace than those with other countries, the consensus in the stock market was that something would eventually be worked out between the two countries and that overall relations were improving. Trump and Chinese leader Xi Jinping were due to meet at the Asia-Pacific Economic Cooperation (APEC) summit at the end of this month.

The market was also comfortable with the roughly 40% tariff already applied to China, reasoning that the US economy was stronger than previously thought to withstand it, and exemptions for products made in China – such as From Apple iPhones were broad enough to soften the economic impact.

If Trump follows through on his latest threat, investors fear the burden will be too great for the U.S. economy, which still relies on imported parts to build cars, solar panels and the like.

Perhaps the bigger risk weighing on the market is China's retaliation on US goods, which could lead to an all-out trade war.

Overnight on Thursday, China further tightened its grip on the rare earths market, of which it controls about 70% of global supply. Beijing said outside entities would have to obtain permits to export virtually anything that uses rare earths and that companies using the metals for military applications would be turned away. The companies' use would be assessed by China on a case-by-case basis.

Rare earth metals are crucial for making semiconductors, electric vehicles and materials for advanced rockets. Trump has sought to increase U.S. supplies of the metal by supporting and even investing in U.S. and Canadian-based companies that mine the metal.

Chip makers such as Nvidia And AMD led the price drop on Friday. Nvidia, which is still trying to gain support from the two countries to sell a less advanced AI chip to China, lost 5%. AMD, which led the latest leg of the rally, fell almost 8%. Apple lost 3%, while Tesla lost 5%.

But it wasn't just the shares of companies directly linked to Chinese trade that fell. It was a sell-off in the broad market, with 424 of the S&P 500 members closing in the red. Professional investors were forced to reduce risk in everything by a sudden drop of this magnitude. As their technology positions came under pressure, other interests had to be sold to raise money. Plus, there's the threat that the potential new tariffs pose to the U.S. economy. Domestic financial values Bank of America And Wells Fargo for example, each lost more than 2%.

A few stocks managed to stay green that day. Walmart and tobacco/nicotine stocks were slightly higher due to their defensive qualities.

Monday could be another tough day for markets, as Trump said in his morning post after the closing bell that he would impose 100% tariffs on China “on top of any tariffs they are currently paying.”

Trump added that the US would impose export controls on “all critical software,” which could have a significant impact on AI leaders like Nvidia. The new duties would take effect early next month, around the time of the summit when Trump would meet Xi. Trump's Friday morning post suggested those talks may not happen now.

The SPDR S&P 500 ETF Trusta fund that tracks the S&P 500 contributed slightly to Friday's session losses after the bell.

Still, some traders and investors believe it may be wise to wait and see whether Trump will fully make good on this threat. Most of the harsh tariffs threatened in early April – which left global markets reeling – were subsequently significantly scaled back through negotiations and waivers, laying the groundwork for a monstrous comeback rally to new highs for the market. It paid off then to call Trump's bluff and buy the dip — and many investors think it will do so again.

“The good news is that this may be a new negotiating tactic used by the administration that could yield good results in the long term,” said Jay Woods, chief market strategist at Freedom Capital Markets, at the height of the NYSE's selling pressure. “The knee-jerk sell-off should be a new buying opportunity.”

It's also worth getting some perspective on Friday's sale. The decline only brought the S&P 500 back to its lowest level in a month. The benchmark is still up more than 11% this year, with a seemingly unstoppable AI trade overshadowing the threat of tariffs, global conflict and an ongoing government shutdown.

The move disrupted an unusually quiet period in the stock market, sending complacent investors running for cover for the first time in a long time and adding to the pain. Thursday marked the 33rd day in a row without a 1% move in either direction in the S&P 500, the longest quiet period since January 2020. The market hasn't seen a major drop since correcting for the rate rollout in April.

One risk is that this sell-off will destroy other things on Wall Street. There is a small but still growing contagion linked to the bankruptcy of private auto parts supplier First Brands. It is stirring up banks with exposure such as Jefferies Financial Group and raising concerns about the once thriving private lending sector. Jefferies fell 4% on Friday and another 6% in after-hours trading.

That's something to watch, along with the possibility that big hedge funds that bought on margin were caught out too long on Friday and now have to aggressively deleverage, which could increase selling pressure next week. The crypto markets, especially the smaller coins outside of bitcoin, were hit particularly hard on Friday. The TRUMP meme coin is down 20% in the last 24 hours.

Stock market futures open for trading on Sunday evening at 6:00 PM ET. The bond market is closed on Monday for Columbus Day.