Dow Jones Industrial Average tests deeper water post-tariffs

• The Dow Jones is struggling to find its feet after steep overnight losses.
• US equities have taken a haircut after the Trump administration's tariff announcements. 
• Rate markets are now at loggerheads with growth and inflation realities.

The Dow Jones Industrial Average (DJIA) bottomed out near the 40,800 level after taking a steep plunge during overnight markets. Investor sentiment has whipsawed in the face of the Trump administration sweeping tariffs package announced this week, knocking equities into fresh lows.

The Dow Jones fell around 1,300 points from the previous day's closing bids, tumbling over 3% to break down below the 41,000 handle for the second time in just four weeks. The Standard & Poor's hit seven-month lows, falling 225 points from Wednesday's ending prices, shedding 4% through the overnight session and through Thursday's US markets. The tech-heavy Nasdaq Composite took the heaviest beating of the major equity indexes, plummeted 1,150 points and shedding nearly 6% peak-to-trough through the midweek sessions.

Read more stock news: Amazon stock craters as tariffs take toll on market

The Trump administration's "Liberation Day" tariff proposals have sparked backlash across the globe, with former US Treasury Secretary Larry Summers accusing the government of computing tariffs without tariff data. This accusation is functionally accurate according to the Trump team's own publications on tariff calculations, which largely involve dividing a country's net exports to the US by their imports from the US, and then dividing that number in half, with a minimum tariff floor of 10%. This explains how the US is able to impose 10% "reciprocal" tariffs on the territory of Heard Island and McDonald Islands, which is populated entirely by penguins and zero humans.

US President Donald Trump has signed off on a flat 10% tariff on all goods imported into the US to take effect on April 5. Calculated "reciprocal" tariffs are expected to kick in on April 9.

The pain train is just getting started, according to the Fitch Ratings agency, which cautioned that US economic growth will be even lower than the rating agency's own already-downgraded forecast in March. Downside impacts from the Trump tariffs are expected to spread to the Federal Reserve (Fed), which Fitch Ratings warned is likely to hold off on interest rate cuts for even longer than expected as the US central bank waits to see the inflation and employment impacts of US tariffs.

To their credit, still-spunky interest rate traders remain undeterred: according to the CME's FedWatch Tool, rate swap markets are pricing in a total of four rate cuts from the Fed through the remainder of the year. However, Fed officials have ramped up their cautious rhetoric recently in an attempt to temper rate cut hopes.

US ISM Services Purchasing Managers Index (PMI) figures through March were the icing on the bitter cake on Thursday, falling to a nine-month low of 50.8 and declining at one of its fastest month-on-month rates since the pandemic. Business activity and consumer confidence have been evaporating in the run-up to the Trump administration's tariffs, and the results are unlikely to see sentiment recover quickly. 

Dow Jones price forecast

The bottom looks ready to fall out of the Dow Jones chart: the DJIA hit a new seven-month low on Thursday, with the major equity index closing in the red more often than not on a weekly basis since mid-February. The 200-day Exponential Moving Average (EMA) near 42,065 is poised to act as a technical ceiling instead of a floor with price action trading on the south side of the key moving average through most of March.

Dow Jones daily chart