Heard on the Street Recap: Tariff Day — WSJ

MARKET SNAPSHOT

U.S. stocks fell sharply after President Trump confirmed that he would impose a 25% levy on Canadian and Mexican goods. Treasury yields fell as looming tariffs have investors increasing bets on interest-rate cuts this year. Oil futures declined after OPEC+ said it would boost output starting in April. Gold prices rebounded from some of their recent weakness as the dollar weakened.

MARKET WRAPS

EQUITIES

U.S. stocks tumbled after President Trump confirmed that he would impose a 25% levy on Canadian and Mexican goods.

The technology-heavy Nasdaq Composite slid 2.6%, leading declines among the three major indexes. The Dow industrials fell 1.5%. The S&P 500 lost nearly 1.8%.

The tariffs on Canada and Mexico are slated to start Tuesday. Hours ahead of the deadline, Trump dashed investors' hopes for a last-minute reprieve, telling reporters that there was "no room left" for negotiations.

New data released Monday morning showed U.S. manufacturers' supply costs jumped in February, as Trump's tariff threats raised the specter of higher inflation.

Earlier Monday, Chinese shares ended mixed, as investors stayed cautious ahead of the country's National People's Congress meeting this week. The date when Trump's additional tariffs on China take effect coincides with the opening of China's NPC, adding to anticipation over Beijing's policy responses to support growth, OCBC analyst Tommy Xie said.

The benchmark Shanghai Composite Index edged 0.1% lower, the Shenzhen Composite Index rose 0.3% and the ChiNext Price Index gained 1.2%. Hong Kong's Hang Seng Index closed 0.3% higher.

Japan's Nikkei Stock Average rose 1.7% following Friday's selloffs and as concerns about borrowing costs ebbed.

Stocks in Australia rose, with the S&P/ASX 200 adding 0.9%.

New Zealand's NZX-50 shed 0.4%, snapping a run of three daily gains amid weakness among infrastructure and real-estate stocks.

COMMODITIES

Oil futures ended lower after the major producers known as OPEC+ said they will boost output starting in April, and as President Trump's planned tariffs on imports from Canada and Mexico threatened to slow demand for energy.

Traders also weighed prospects for a Ukraine peace deal after Friday's public clash between Trump and Ukrainian President Volodymyr Zelensky in the Oval Office. Prices for oil, meanwhile, failed to find support from an improvement in Chinese economic data.

West Texas Intermediate crude for April delivery fell 2% to settle at $68.37 a barrel on the New York Mercantile Exchange. May Brent crude lost 1.6%, ending at $71.62 a barrel on ICE Futures Europe.

The Organization of the Petroleum Exporting Countries and its allies "want to appease Trump but if you look under the hood, we feel they want to recapture market share they have lost," said Tariq Zahir, managing member at Tyche Capital Advisors.

Gold futures rebounded from the end of month selling seen last week, ending up 1.9% to $2,890.20 an ounce.

TODAY'S TOP HEADLINES

Trump Says Canada-Mexico Tariffs Will Take Effect, 'No Room Left' For Talks

President Trump said the U.S. would go ahead with 25% tariffs on goods from Canada and Mexico effective Tuesday, declaring there was "no room left" for negotiations with America's neighbors.

"Tomorrow, tariffs-25% on Canada, and 25% on Mexico-and that will start tomorrow," Trump said Monday at the White House. "So they're going to have a tariff, and what they have to do is build their car plants, frankly, and other things, in the United States, in which case you have no tariffs."

U.S. stocks fell in afternoon trading after Trump said the tariffs would move forward.

U.S. Factory Activity Eased as Tariffs Threats Spark Accelerating Costs

U.S. manufacturing activity expanded slightly in February for a second straight month after 26 months of contraction, although at a more cautious pace as price growth accelerated on the threat of new tariffs.

The Institute for Supply Management said Monday that its purchasing managers' index of manufacturing activity ticked down to 50.3 in February from 50.9 in January. That was slightly weaker than the 50.6 from a consensus of economists polled by The Wall Street Journal.

It was, however, above the 50-mark that divides growth and contraction, the second time after more than two years below.

European Defense Sector Enters Upswing as Europe Prepares to Rearm

Europe's defense industry is on course for an extended upswing, as investors rally to take positions ahead of share price and guidance increases, analysts said.

European leaders have signaled more readiness on providing Ukraine with security guarantees should a ceasefire deal be reached, and expanding their defense capabilities amid fears the U.S. could decrease its military presence in the continent.

European governments such as Denmark and the U.K. have announced boosts to defense spending. Other members of the North Atlantic Treaty Organization are expected to follow, according to NATO Secretary-General Jens Stoltenberg. Meanwhile, the European Council meets Thursday to discuss lifting defense spending, possibly by easing fiscal rules.

Trump, Chip Maker TSMC Announce $100 Billion Investment in U.S.

WASHINGTON-Taiwan Semiconductor Manufacturing Co. plans to invest at least $100 billion more in chip-manufacturing plants in the U.S. over the next several years under a plan announced Monday by the company and President Trump.

TSMC plans to use the funds to add to its chip manufacturing in Arizona. It will construct three new chip plants, two chip-packaging plants and a research and development center, Chief Executive C.C. Wei said during a White House appearance with the president.

Such an expansion would advance a long-pursued U.S. goal to revive the domestic semiconductor industry after manufacturing fled largely to Asian countries in recent decades.

Kroger CEO Rodney McMullen Resigns After Investigation Into Personal Conduct

Kroger Chief Executive Rodney McMullen resigned from the company following a board investigation into his personal conduct, ending a more than four-decade career at the grocery chain.

Kroger, the biggest U.S. supermarket chain by sales, said Monday that while the conduct was unrelated to the company's business, it was inconsistent with its ethics policy. Lead director Ronald Sargent will serve as chairman and interim CEO while the company searches for a permanent replacement for McMullen.

"I plan to be a steady, but active hand in the execution of our strategy, " said Sargent, who has been on Kroger's board since 2006 and lead director since 2017. He previously held corporate roles at Kroger and served as CEO of office-supplies retailer Staples.

Expected Major Events for Tuesday

00:30/AUS: Jan Retail Trade

00:30/SKA: Feb South Korea Manufacturing PMI

00:30/AUS: 4Q International Investment Position

00:30/AUS: 4Q Balance of Payments

05:00/JPN: Feb Consumer Confidence Survey

08:30/HK: 4Q Quarterly Statistics on Vessels, Port Cargo & Containers

22:00/AUS: Feb Australia Services PMI

22:00/AUS: Feb Australian PMI

22:00/AUS: Feb Australian PCI

23:00/SKA: 4Q Revised GDP / Preliminary Gross National Income

All times in GMT. Powered by Onclusive and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

Australia's national home value index rose 0.3% in February, reversing a three-month downturn, according to a Monday report by CoreLogic.

Home values rose modestly in February in all regions except Darwin, which saw a decline of 0.1%, and Regional Victoria, where prices ended flat. Melbourne and Hobart led the overall rise by gaining 0.4% each.

Over the four weeks leading up to Feb. 23, the number of new listings across the combined capitals was 4.7% lower than the same period last year and 1.5% below the five-year average.

"Although total advertised supply levels are almost 1% higher than a year ago, listings remain -7.9% below the previous five-year average and the reduced flow of fresh stock to market could be supporting some upward pressure on prices, especially if buyers are becoming more active amid higher sentiment and lower rates," said CoreLogic's research director Tim Lawless.

By Alexander Osipovich

The Dow Jones Industrial Average dropped nearly 650 points on Monday as President Trump confirmed that he would impose a 25% levy on Canadian and Mexican goods, dashing investors' hopes for a last-minute reprieve.

The declines were broad-based, with 23 of the 30 stocks in the blue-chip index and seven of the 11 sectors in the S&P 500 falling.

Market darling Nvidia sank 8.7%, oil company ConocoPhillips slid 6.6% and discount retailer Dollar Tree declined 5.6%.

Hours ahead of the tariff deadline, Trump told reporters that there was "no room left" for negotiations. Although Wall Street has welcomed many of Trump's economic policies, such as cutting taxes and regulation, his threats to impose tariffs have stoked fears of a trade war with major U.S. trading partners. Such a standoff could lead to slower growth and higher prices for consumers.

"He's willing to do the shock and awe on trade and show that he's serious, and he's willing to put up with short-term market pain," said Scott Martin, chief investment officer of Kingsview Wealth Management.

"I don't believe this is going to be an all-out trade war," Martin said, adding that his firm had taken advantage of the drop to buy beaten-down technology shares.

Martin argued that the Canada and Mexico tariffs — along with Trump's plan to ramp up duties on Chinese goods — were part of a long game by the president to extract concessions from trading partners, which would ultimately benefit the U.S.

The technology-heavy Nasdaq Composite slid 2.6%, falling to a level last seen just before Trump's election victory in November.

The S&P 500 fell 1.8%, while the Dow closed 1.5% lower in a rocky first trading session in March. The losses came after all three indexes fell in February, retreating from post-election record highs. Despite its recent losses, the Dow is up 1.5% for 2025; the other two indexes are in the red.

New data released Monday morning showed U.S. manufacturers' supply costs jumped in February, as Trump's tariff threats raised the specter of higher inflation.

Tech stocks were the worst-performing sector of the S&P 500, with trade-sensitive chip makers among the biggest losers.

As U.S. stocks fell, European stocks rallied, pushing the pan-continental Stoxx Europe 600, the U.K.'s FTSE 100 and Germany's DAX to fresh records.

Some of the biggest gainers were defense stocks, which surged after the region's leaders talked up military spending. European governments are scrambling to put together a Ukraine-Russia peace plan in the wake of Trump's rancorous meeting with Ukraine's president on Friday. London-listed shares of BAE Systems jumped 15%.

Bitcoin was trading at about $85,900 late Monday afternoon, having erased practically all of its gains from a Sunday rally sparked by Trump's comments on creating a U.S. strategic crypto reserve. Many details on how such a reserve would work remain unclear.

The U.S. 10-year Treasury yield fell to 4.178%, from 4.228% on Friday, as investors flocked to the perceived haven of government bonds.

Write to Alexander Osipovich at alexo@wsj.com

In New York, the Dow Jones Index dropped 691 points or 1.58 percent on Monday.

Losses were led by Nvidia (-8.58%), Caterpillar (-3.60%) and Amazon (-3.55%).

By Angela Palumbo

Semiconductor stocks have taken a hit this year, but one BofA Securities analyst remains optimistic about the sector's future.

Risks, including the implementation of tariffs and restrictions on exports of the most advanced artificial-intelligence chips, have semis under pressure. The PHLX Semiconductor Index, or the SOX, has dropped 6% this year.

But BofA Securities analyst Vivek Arya wrote in a note on Monday that it is common for the SOX to be volatile, and the current drop doesn't necessarily point to a long-lasting trend.

Last week, the index dropped 7.2%. Since the beginning of 2021 through the end of last week, the SOX has faced 21 separate 5% or more weekly declines, according to Dow Jones Market Data, while the S&P 500 has had only three instances of 5% or more weekly drops in the same time frame. However, from Dec. 31, 2020, through Feb. 28, 2025, the SOX has appreciated 71% while the S&P 500 has gone up 59%.

AI chip darling Nvidia — a member of the SOX — has been falling after the release of its quarterly results, even though they were better than expected. Despite this and the broader selloff, Arya is confident upcoming earnings from Marvell Technology and Broadcom could turn things around for the space.

"We expect beat/raise results from AVGO, MRVL...to re-energize interest in AI semis, since capex by U.S. cloud customers and sovereign AI investments remains the only dependable bright demand spot in the global economy," Arya wrote in a note on Monday.

Marvell is scheduled to report earnings on March 5 and Broadcom on March 6.

Arya isn't alone in his optimism. J.P. Morgan's Harlan Sur wrote on Sunday that he believes the fundamental setup is solid for Marvell and Broadcom, with both companies benefiting from "strong hyperscale capex spending."

Hyperscalers are large cloud service providers such as Alphabet, Microsoft, and Amazon.com. All of these companies have said they plan on spending tens of billions of dollars on AI this year, including for data center buildouts and other AI initiatives. Some of that spending has to go to hardware, benefiting companies such as Marvell and Broadcom.

Marvell sells a portfolio of chips and hardware products for data centers and AI infrastructure and helps big tech companies design their own AI semis. Broadcom also helps design in-house processors for big tech.

Arya is also confident in the potential long-term positive impact AI chatbots could have on chips. Some of these chatbots include OpenAI's ChatGPT, Alphabet's Gemini, DeepSeek, and Meta AI.

"The rise of chatbots in our view is a major positive for AI semis as it can drive continued strong demand for training and inference chips, drive new business models and applications, and reassure investors of return on investment on AI," Arya wrote.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

The Toronto Stock Exchange closed down 1.5% on Monday as U.S. President Donald Trump confirmed he will go ahead with planned 25% tariffs on imports from Canada's and Mexico tomorrow, launching a trade war likely to damage the economies of all three countries.

The S&P/TSX Composite Index closed down 391.88 points to end at 25,001.57, the lowest since Jan.16. The biggest declining sectors were Technology and Energy, down 3.40% and 5.13% respectively.

Trump on Monday confirmed he will place the levies on imports from the two largest U.S. trading partners on Tuesday, as well as boosting import taxes on China, its third-largest trading partner, to 20% from 10%. He told reporters "There's no room left for a deal on tariffs on Mexico and Canada". Imports of Canadian energy will be taxed at a 10% rate. Canadian is the largest foreign source of U.S. oil imports, supplying about 20% of the country's daily consumption.

Melanie Joly, Canada's Minister of Foreign Affairs, said Canada will initially impose retaliatory tariffs on $30 billion of U.S. imports, a first tranche that will eventually rise to $155 billion of American products.

Trump's move comes as the U.S. economy is weakening, with the Atlanta Fed's GDPNow model forecasting a 2.8% drop in first-quarter U.S. gross domestic product, down from a predicted drop of 1.5% on Friday.

Of commodities, West Texas Intermediate crude oil fell to a three-month low after OPEC+ said it will go ahead with a plan to begin returning 2.2-million barrels per day of production cuts in 18 monthly tranches beginning next month. WTI crude for April delivery closed down US$1.39 to settle at US$68.37 per barrel, the lowest since Dec.9, while May Brent crude closed down US$1.19 to US$71.62.

But Gold was sharply higher late afternoon Monday as the dollar plunged ahead of the start of promised U.S. tariffs on imports from its two largest trading partner while safe-haven demand increased amid geopolitical concerns, including relations between the U.S. and Ukraine. Gold for April delivery was last seen up $52.90 to US$2,901.40 per ounce.