The three major indices on the New York Stock Exchange started with a sharp decline. As U.S. President Donald Trump's tariff policy received a mostly illegal ruling from a U.S. court, financial uncertainties have been raised, while the burden of high prices is also understood to weigh on stock prices.
As of 9:35 a.m. local time on the 2nd, the Dow Jones Industrial Average at the New York Stock Exchange recorded a drop of 531.12 points (1.17%) from the previous session to 40,513.76. The Standard & Poor's (S&P) 500 index fell 77.64 points (1.20%) to 6,382.62, while the Nasdaq Composite Index decreased by 284.89 points (1.33%) to 21,170.66.
On the 29th of last month, a U.S. court ruled in an appeal that most of the tariffs promoted by Trump are illegal. It determined that the International Emergency Economic Powers Act (IEEPA), which Trump used as the basis for imposing reciprocal tariffs, does not grant the authority to impose tariffs, and that such authority lies with Congress.
In light of this news, U.S. government bond yields have sharply risen, reflecting financial uncertainties. With Trump expressing the intention to appeal, if this ruling is confirmed by the Supreme Court, tariffs may be abolished, and the U.S. government could face increased chances of having to return the money collected from tariffs.
Moreover, the Trump administration has introduced a tax cut law (OBBBA) anticipating large tariff revenues. If the tariffs are abolished, the Trump administration's fiscal roadmap could be significantly disrupted. Long-term government bond yields have surged, cooling investor sentiment in stocks. When long-term U.S. government bond yields rise, the attractiveness of stocks declines.
Not only in the United States but also in the United Kingdom and France, financial instability has become prominent, causing long-term government bond yields to soar. Japan is also experiencing upward pressure on long-term yields due to instability in the cabinet.