Investing.com - US stocks fell sharply Monday as investors weighed the potential impact on the US economy and corporate profits after President Donald Trump imposed trade tariffs on some of the country's closest trading partners.
At 09:35 ET (14:35 GMT), the Dow Jones Industrial Average fell 395 points, or 0.9%, the S&P 500 index slid 87 points, or 1.4%, and the NASDAQ Composite slumped 360 points, or 1.9%.
Trump on Saturday signed an executive order imposing 25% duties against Canada and Mexico, and an additional 10% duty on China, calling on the countries to stem the flow of illegal drugs and immigrants into the U.S.
The new trade tariffs, which will take hold from February 4, cover all imports from the three countries, although oil and gas imports from Canada will see a smaller duty.
All three countries decried the tariffs and vowed retaliation.
Trump had largely telegraphed the tariffs over the past two weeks, the sharp drop in futures suggested that investors had expected some form of compromise.
Analysts expect the tariffs to drive up US inflation, given that they will be paid largely by domestic importers. Higher inflation diminishes the prospect of more interest rate cuts from the Federal Reserve.
“The resulting surge in US inflation from these tariffs and other future measures is going to come even faster and be larger than we initially expected… the window for the Fed to resume cutting interest rates at any point over the next 12 to 18 months just slammed shut,” analysts at Capital Economics wrote in a note.
Away from the turmoil surrounding tariffs, this week will be the biggest to date for fourth-quarter earnings, which have become increasingly important in determining the state of the market.
More than 120 companies in the S&P 500 are set to report their results, including the likes of Google-parent Alphabet (NASDAQ: GOOG ) and e-commerce giant Amazon (NASDAQ: AMZN ), which are set to unveil their quarterly figures on Tuesday and Thursday, respectively.
A slew of other major firms, including Alibaba (NYSE: BABA ), AMD (NASDAQ: AMD ), Walt Disney (NYSE: DIS ), Qualcomm (NASDAQ: QCOM ) and Uber (NYSE: UBER ), are also due to report this week.
Elsewhere, General Motors (NYSE: GM ) and Ford (NYSE: F ) fell sharply as investors parsed through the implications of the new tariffs on some of America's closest trading partners. GM in particular constructs more of its cars in Mexico than any other manufacturer.
Constellation Brands (NYSE: STZ ) stock also dropped after a number of Canadian provinces pulled US alcohol from their government-run liquor stores in retaliation for the US tariffs.
As far as economic data is concerned, the January manufacturing PMI number is out later in the session, but most eyes will be on the January nonfarm payrolls report will also be out Friday.
Economists expect that 154,000 jobs were added last month, a drop from the bumper 256,000 added the prior month. The unemployment rate is predicted to have remained unchanged at 4.1%.
Oil prices rose Monday as President Trump’s announcement of tariffs on imports from two of the U.S.’s major suppliers raised concerns about potential disruptions in oil supply chains.
By 09:35 ET, the US crude futures (WTI) gained 1.6% to $73.66 a barrel, while the Brent contract rose 0.9% to $76.31 a barrel.
The US imports approximately 4 million barrels of Canadian oil and nearly 500,000 barrels of Mexican oil daily.
The newly imposed tariffs are expected to increase costs for US refiners, especially those in the Midwest and Gulf Coast regions, potentially leading to higher fuel prices and potential production cuts.
(Ambar Warrick contributed to this article.)