Stock Market Today: Dow Drops 670 Points on Trade War Effect
A prodigious rally by the battered leader of the AI revolution typified an increasingly volatile picture for investors, traders and speculators.



There was no last-minute deal, the first steps on the path to what Warren Buffett says is a trade war have been taken, and the stock market's initial reaction was panic.
The Trump administration might have a bigger picture in mind, but right now financial markets reflect rising uncertainty. And that uncertainty is beginning to show up in corporate as well as consumer behavior.
"Tariffs are actually, we've had a lot of experience with them," the Oracle of Omaha said in a Sunday interview with CBS News. "They're an act of war, to some degree."
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They also drive inflation: "Over time, they're a tax on goods. I mean, the Tooth Fairy doesn't pay 'em! And then what? You always have to ask that question in economics. You always say, 'And then what?'"
According to Buffett, "Prices will be higher 10 years from now, and 20 years from now, and 30 years from now." Not for nothing here's what Warren Buffett's portfolio looked like as of late December.
All three main U.S. indexes bounced well off their respective session lows – helped by an 8.4% bottom-to-top intraday rally for Nvidia (NVDA). The AI stock was down more than 8% on Monday and has shed about $400 billion in market capitalization since it announced earnings last week.
Today, NVDA both soared and sagged late but was tops among the 30 Dow Jones stocks at the closing bell, clinging to a gain of 1.7%.
Despite the renewed leadership attempt from the No. 1 name in semiconductor stocks the Dow Jones Industrial Average declined 1.6% to 42,520, the S&P 500 was down 1.2% to 5,778, and the tech-heavy Nasdaq Composite slipped 0.4% to 18,285.
Is this the most important price right now?
Meanwhile, the yield on the 10-year U.S. Treasury note is still trending lower, getting down as far as 4.106% on Tuesday. It has declined by nearly 70 basis points from an intraday peak of 4.896% on January 13 to 4.204% as of 4 pm Eastern Standard Time today.
As Treasury Secretary Scott Bessent said in a February 5 interview with Fox Business, "The president wants lower rates. He and I are focused on the 10-year Treasury and what is the yield of that."
"The Trump team has made it clear it is more concerned with lowering interest rates than boosting the stock market," wrote Chris Murphy, co-head of derivative strategy at Susquehanna International Group after the yield on the 10-year hit a 2025 low on Monday.
Murphy added that less than a week ago, Bessent "prepared investors for some short-term pain and reminded investors the next six to 12 months are 'Biden's economy'."
The Cboe Volatility Index surged to another new 2025 high and a two-and-a-half month peak of 26.35 intraday on Tuesday. The VIX settled down to 23.45, though investors, traders and speculators are yet to be assured by the secretary or the president.
The Trump trade is dead, long live the Trump trade
"There could be a method to all this," opines Matthew Raskin, head of U.S. rates research at Deutsche Bank. "Take any growth hit early, create an environment favorable to Fed rate cuts, and then follow with a big fiscal package that boosts animal spirits heading into 2026."
Raskin notes that "six weeks past the inauguration," bond yields have declined "across the curve, with essentially all the declines in reals; equities are lower; credit spreads are wider; the dollar is weaker and oil is down sharply. This is not the Trump trade as advertised."
Raskin cites "growth-negative headlines from repeated tariff threats" as well as "chaotic DOGE cuts" for "historically elevated policy uncertainty" that's "weighing on sentiment."
Potential hurdles for the Trump administration to overcome as it executes such a plan include a "slim" majority in the House of Representatives and "drawn out" negotiations for any fiscal stimulus bill. "We've argued repeatedly that fiscal policy is central to the rates outlook," Raskin explains.
Politics set the stage for "a shutdown and debt limit fight in the interim," Raskin concludes.
On Target
In an interview with CNBC shortly after Target (TGT) reported fourth-quarter earnings, CEO Brian Cornell said consumers "will likely see price increases over the next couple of days" as a result of new tariffs on produce from Mexico. These include strawberries, avocados and bananas.
For fiscal year 2025, Target guided to net sales growth of approximately 1% vs expectations of 2.5%. The midpoint of its earnings-per-share guidance range, $9.30, is just above Wall Street's average estimate of $9.29 per share.
The consumer staples stock was down 3% on Tuesday but did recover from a steeper 6.8% intraday decline. Target said in its investor day presentation that it has reduced its exposure to China for its private-label brands to approximately 30% from 60% in 2017 and has moved production to markets such as Guatemala and Honduras.
Management forecast "meaningful year-over-year profit pressure in its first quarter relative to the remainder of the year." The retailer cited "ongoing consumer uncertainty and a small decline in February Net Sales" and "tariff uncertainty and the expected timing of certain costs within the fiscal year."
Indeed, because of "continued elevated volatility," Target will no longer provide quarterly guidance but will only issue annual guidance.
Related content
- How to Hedge Against Trump's Tariffs
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David Dittman is the former managing editor and chief investment strategist of Utility Forecaster, which was named one of "10 investment newsletters to read besides Buffett's" in 2015. A graduate of the University of California, San Diego, and the Villanova University School of Law, and a former stockbroker, David has been working in financial media for more than 20 years.
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