March 4 (Reuters) - Wall Street's main indexes fell on Tuesday, with the tech-heavy Nasdaq leading declines, as investors feared that an escalating trade war between the U.S. and its partners could damage the economy.
The Nasdaq Composite index fell 10% from its record high hit on December 16 into what is commonly known as correction territory.
At 10:01 a.m. ET, the Dow Jones Industrial Average (.DJI), fell 610.73 points, or 1.41%, to 42,580.51, the S&P 500 (.SPX), lost 86.35 points, or 1.50%, to 5,762.26 and the Nasdaq Composite (.IXIC), lost 284.14 points, or 1.55%, to 18,066.06.
Financials (.SPSY), led declines among the S&P 500's 11 sectors with a 3% drop. Wall Street's biggest banks such as Citigroup (C.N), and JPMorgan Chase & Co (JPM.N), fell 7.2% and 3.9%, respectively, sending the bigger banks index (.SPXBK), down 4.8%.
The CBOE market volatility index (.VIX), edged up 2.35 points to touch a two-month high.
The latest trigger for equities came after the U.S. tariffs on imports from Mexico and Canada, along with doubled duties on Chinese goods took effect on Tuesday. Following this, Beijing responded with additional tariffs on U.S. imports and Canada has vowed a response.
A standoff between the countries could upend nearly $2.2 trillion in two-way annual trade.
U.S. trade deficit in goods with China fell during Trump's first presidency. Trade deficits increased for both Canada and Mexico during Biden's presidency from 2020.
U.S. trade deficit in goods with China fell during Trump's first presidency. Trade deficits increased for both Canada and Mexico during Biden's presidency from 2020.
Ford (F.N), and General Motors (GM.N), that have vast supply chains across north America, fell 2.7% and 5.9%, respectively.
Nasdaq components such as Nvidia (NVDA.O), and Meta (META.O), fell, while Tesla (TSLA.O), dropped 6.4% after data showed that the automaker's China-made electric vehicles sales fell 49.2% in February.
Illumina (ILMN.O), fell 2.9% after China banned imports of genetic sequencers from the medical equipment maker, just minutes after Trump's tariff announcement.
"There are concerns that (tariffs are) going to put a lot of pressure on the economy and the markets overall," said Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report.
"Sectors that will be hit the hardest would probably be the industrial sector because they're very cyclical, the small caps ... and then (highly valued) tech stocks."
Investors are pricing in that the surcharges will fan inflation pressures, dampen demand and eat into corporate profits at a time when recent data has resurfaced expectations of a stalling economy. The domestically focused small-caps Russell 2000 index <.RUT> fell 2%.
Interest rate futures point to the Federal Reserve delivering at least three 25 basis points interest rate cuts by December, up from about two on Monday, as traders bet on the likelihood that slowing growth could nudge the central bank to lower borrowing costs.
New York Fed President John Williams' comments later in the day will be parsed for the central bank's stance on monetary policy.
U.S. shares of bullion miners such as Sibanye Stillwater rose 1.7%, tracking higher gold prices as markets flocked to the safe-haven asset.
Target (TGT.N), lost 5.5% after the retailer forecast full-year comparable sales below estimates.
Best Buy (BBY.N), fell 14% after the electronics retailer issued a downbeat forecast and warned of impact of tariffs on demand.
Declining issues outnumbered advancers by a 3.99-to-1 ratio on the NYSE and by a 3.93-to-1 ratio on the Nasdaq.
The S&P 500 posted 38 new 52-week highs and 37 new lows, while the Nasdaq Composite recorded 16 new highs and 484 new lows.
Reporting by Johann M Cherian and Sukriti Gupta in Bengaluru; Editing by Maju Samuel
