Why Has the Dow Jones Plunged 500 Points in One Day?

Dow Jones drop

The Dow Jones Industrial Average dropped a total of 500 points the first trading day of April — closing at 23,644.52 points.

The index hit a new low for the year, at one point falling as much as 811 points to 23,344.52 points.

All of the other major indexes followed the Dow’s lead. The NASDAQ dropped by 3% and the S&P dropped 2.4%.

E-commerce giant Amazon dropped by over 5%, along with other tech stocks including Netflix and Tesla.

Why has the Dow Jones dropped?

There are a few reasons driving the market lower, including fears of a trade war and of regulation in the tech industry.

In particular though, over the past week President Trump has been going after one of the biggest market drivers, Amazon, which consequently sent the market tumbling.

A tweet from Trump last week suggested that Amazon doesn’t pay their fair share of tax and that the US Postal Service loses billions of dollars delivering packages for them.

Trump tweeted yesterday saying:

Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed. Also, our fully tax paying retailers are closing stores all over the country…not a level playing field!

Nonetheless, more than just Trump’s Twitter behaviour is responsible for the market-wide drop. Fears of a trade war are also weighing heavy on the stock market.

CNN reported that on Monday China raised import duties on $3 billion of US imports in response to Trump’s steel tariffs. Including pork, other meats, fruit, and steel pipes.

What can we expect to see next from the Dow?

Trump still plans to place additional tariffs on $50 billion worth of Chinese goods, with Beijing promising to respond, as reported by CNN.

So far, neither side is backing down. So we can expect to see this trade war continue.

Regards,

Dannielle Rawlings,
For Markets & Money

PS: Of course we hope that the powers that be will eventually back down, and come to some kind of accommodation with one another. But if the world’s political leaders can’t find a mutually agreeable middle ground, tariffs and trade wars — along with record-high global debt levels — could one day contribute to a full-blown financial crisis. To make sure you’re prepared, Markets & Money Editor Vern Gowdie has written a free report, ‘Global Financial Crisis 2018’. You can download your free copy here.

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