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Second day of market chaos since Trump tariff announcement

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Indexes down: S&P 500 5.10%, Nasdaq 5.04%, Dow 4.48%

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Nasdaq drops 20% from all-time closing highs

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Fed Chair Powell warns of tariff impact on inflation

(Updates to mid-afternoon trade)

By David French

April 4 (Reuters) - Wall Street slumped for a second

straight session on Friday, pushing the Nasdaq toward a bear

market, as U.S. President Donald Trump's sweeping tariffs drew

responses from global governments, escalating a trade war and

stoking recession fears.

All three main benchmarks were down by more than 4.5% in

mid-afternoon trade, on course for their worst two-day declines

since the coronavirus pandemic during Trump's first term.

The Nasdaq Composite's slide had it on track to

confirm a bear market for the tech-heavy index. The Dow Jones

Industrial Average was on course to confirm a

correction

.

Since late on Wednesday, when Trump boosted tariff

barriers to their highest level in more than a century, S&P 500

companies have lost over $4 trillion in stock market value. That

record two-day decline exceeded a two-day loss of $3.3 trillion

in March 2020, according to LSEG data compiled by Reuters.

Investors have dumped stocks, fearing both the new U.S.

economic reality and also how U.S. trading partners might

retaliate by steepening their own trade barriers. The CBOE

Volatility index, or Wall Street's fear gauge, hit its

highest level since August at 42.13 points.

China's finance ministry said it would impose additional

tariffs of 34% on all U.S. goods from April 10.

Markets then dropped further on talks between the prime

ministers of Britain, Australia and Italy on how to respond to

Trump's tariff salvo.

"We're in the Wild West of a trade war right now," said

Mariam Adams, managing director at UBS Wealth Management.

"Anything can happen, and this kind of uncertainty is

torture for global markets."

At 02:18 p.m. ET, the Dow Jones Industrial Average

fell 1,812.68 points, or 4.48%, to 38,729.54, the S&P 500

slumped 275.80 points, or 5.10%, to 5,121.21 and the

Nasdaq Composite lost 833.35 points, or 5.04%, to

15,716.54.

Earlier, investment bank JP Morgan said it was

forecasting a 60% chance of the global economy entering a

recession by year-end, up from 40% previously.

Federal Reserve Chair Jerome Powell spoke publicly for the

first time since Trump's tariff announcement. Powell highlighted

that the unexpectedly hefty tariffs could trigger higher

inflation and slower growth, setting the stage for challenging

decisions for U.S. central bankers.

Traders still anticipated a more accommodative Fed policy,

with money market futures pricing in cumulative rate cuts of 100

basis points by the end of 2025, compared with about 75 bps a

week earlier.

Safe-haven buying in the bond market sent the yield on the

benchmark 10-year Treasury notes to touch a

six-month low. It rebounded slightly to 3.98% in mid-afternoon

trade.

This pushed U.S. bank stocks down further, with the

sector under pressure globally, as the prospect of interest rate

cuts from central banks and a hit to economic growth from

tariffs would crimp profitability. The S&P Banks index

dropped 6.6%.

All 11 S&P sectors were more than 2.8% lower, with energy

the leading laggard for the second straight day, off

7.9%, as companies tracked a 7.2% decline in U.S. crude prices.

U.S.-listings of Chinese companies dived, with JD.com ( JD )

and Alibaba ( BABA ) and Baidu ( BIDU ) shedding over 9% each.

Companies with exposure to China also fell across the board,

with mega-caps such as Apple ( AAPL ) falling 6.4%.

The chipmakers index sank 7.3%, compounding the 9.9%

decline the previous day. The sector is particularly vulnerable

to both China and U.S. tariffs as many chip companies design

their chips in the U.S., but have them manufactured in China,

potentially hitting them with a double-whammy of levies.