A fresh tariff threat from President Trump sank stocks on Thursday, pushing the S&P 500 to its fourth consecutive daily decline and reinvigorating investor worries about the outlook for the global economy.
The trading day didn’t start out so badly. Stocks rose throughout the morning, after the Federal Reserve cut interest rates on Wednesday, with the S&P 500 gaining as much as 1 percent by the early afternoon.
Then, just before 1:30 p.m., Mr. Trump said on Twitter that the United States would impose a 10 percent tariff on an additional $300 billion worth of Chinese imports starting in September.
Over the next hour, the market’s gains quickly melted away. Outside the stock market, benchmark oil prices, which are highly sensitive to the global economic outlook, plunged 7 percent and yields on government bonds tumbled.
The S&P 500 closed down 0.9 percent, led by drops in the energy and financial sectors, both of which fell more than 2 percent. The tech heavy Nasdaq composite index fell 0.8 percent. The Russell 2000 index of small capitalization stocks, typically viewed as weighted toward more domestically-focused companies, fell 1.5 percent.
“There’s no ambiguity about what’s pushed us off the ledge,” said Ian Burdette, senior managing director at brokerage firm Tribal Capital Markets. “The tweet just really took the wind out of the sails.”
Investors are jittery for good reason. In May, a rise in trade tensions — punctuated by some tweets from Mr. Trump — set off a painful bout of market volatility that sent the S&P 500 down 6.6 percent.
New tariffs would most likely weigh on an American economy that is already showing some signs of softness. On Thursday, the Institute for Supply Management’s manufacturing index data for July suggested a deceleration in the United States industrial sector. A Department of Commerce report also showed that construction spending fell sharply and unexpectedly in June.
But those were just the latest updates on the economic headwinds hitting the United States and threatening the longest economic expansion on record.
Public companies, which are in the middle of reporting on second-quarter profit and sales numbers, have been offering weak outlooks for the rest of the year, prompting analysts to reduce earnings expectations.
The most recent data on economic growth showed the American economy slowing to a 2.1 percent annual pace in the second quarter from 3 percent in the first, with weakness in business investment weighing on the expansion.
For much of the year, however, investors have chosen to ignore signs of weakness, focusing instead on growing expectations that the Federal Reserve would cut interest rates to support growth. Through the end of trading on July 30, the day before the Fed’s interest rate decision, the S&P 500 was up 20.7 percent in 2019, and even after Thursday’s decline, investors continue to sit on gains of almost 18 percent.
“I think that the market has been so focused on the Fed that they didn’t care that profits are slowing or that tariffs are a risk,” said Dan Suzuki, a portfolio strategist at Richard Bernstein Advisors, a money manager based in New York.
The Fed delivered on those expectations on Wednesday, cutting its key federal funds target rate by a quarter-point. Instead of celebrating, however, investors appeared underwhelmed by that widely expected decision, sending stocks lower.
Now expectations are building for more rate increases at the Fed’s next meeting in September. In the market for futures, where investors bet on the movement of the federal funds rate — the rate the Fed targets to set monetary policy — investors are now putting 70 percent odds on another quarter-point cut at the next meeting.
“The market doesn’t think the Fed is done,” said Randy Watts, chief investment strategist at the brokerage firm William O’Neil & Company.