The Dow Jones Industrial Average (DJIA) experienced sharp volatility on Monday, opening more than 1,000 points below Friday’s close and dipping below 37,000 for the first time since December 2023, largely due to ongoing tariff concerns. Investor sentiment temporarily rose on rumours of a 90-day tariff extension before President Trump refuted these claims and announced an additional 50% tariff on Chinese goods set to start on April 8.
Following the announcement, the DJIA fell back to 37,500, erasing any gains made earlier in the day. The S&P 500 also dropped by 1.3%, reaching 5,000, while the Nasdaq Composite fell 0.9% to below 15,500. However, tech stocks like Super Micro Computer and Nvidia saw gains, contrasting with losses for companies like Nike and Apple, which fell 5% and 4.2%, respectively.
The Dow In Bear Territory
The Dow remains deep in bear territory, trading around 16% below record highs from last December. The technical rejection from the 37,000 level suggests potential for recovery bids, yet it remains below the important 40,000 mark, with the 200-day Exponential Moving Average near 42,000 presenting additional barriers.
Tariffs, designed to protect local industries, present debates among economists regarding their impact on domestic markets and international relations. As the 2024 presidential election approaches, Trump aims to leverage tariffs to bolster the US economy, focusing especially on Mexico, China, and Canada, which accounted for 42% of US imports in 2024.
The data clearly shows that equities are responding disproportionately to tariff headlines, indicating how sensitive pricing remains to sources beyond measurable economic indicators. The sharp drop in the Dow Jones, opening over 1,000 points lower, underscores just how reactive participants have become to policy moves with material consequences—especially when the source of the volatility is an executive announcement rather than scheduled macroeconomic data. What looked like a rally proved superficial. Once it became evident that the 90-day extension rumour was incorrect, gains were quickly unwound, and the DJIA collapsed back to mid-37,000, failing to reclaim any firm trendline support.
The S&P’s retreat to the 5,000 level reflects a broader repricing beyond the industrial-heavy Dow components. Nasdaq, with its lower exposure to trade-dependent conglomerates, managed to hold relatively better but still moved lower. Within tech, a dichotomy is emerging—chipmakers like Super Micro and Nvidia showed resilience, possibly due to supply-chain insulation or long-term AI-related flows. Contrast that with firms like Apple and Nike which rely heavily on global exports and manufacturing cycles, particularly with Asia. Their respective 4.2% and 5% losses show where downward pressure is concentrating.
Technical Analysis Of The Dow
Technically, the rejection near 37,000 is telling. That zone acted as a short-term pivot during winter but lacked confirmation of strength above. We’re now seeing lower highs and shallow support forming underneath. The mid-40,000s remain well outside near-term reach. The 200-day EMA pressing down around 42,000 adds confluence for upper resistance—currently unreachable without new catalysts. While there is some room for short-term value buying near 36,500 and 36,200, conviction at these levels appears limited from a trend-following view.
Let’s turn to the subject of tariffs. Rather than marginal adjustments, this latest round—extra 50% duties starting in April—introduces a shock to forward-looking risk models. Trump’s strategy targets North American and Asian trade partners with whom cross-border flows are heavily integrated into corporate earnings. China, Mexico, and Canada represent nearly half of inbound US goods. Traders positioning around production costs, sourcing risk, or foreign exchange-linked imports would do well to revise pricing tiers. These adjustments may begin appearing sector by sector in earnings expectations and guidance revisions over the coming weeks.
Volatility in these conditions tends to skew option premiums higher. Implied volatility readings are already lifting mildly against historical norms as put-call skews widen in large-cap names exposed to cross-border trade. We may reconnect with levels last seen during late Q4 2023 when tariff speculation previously influenced risk flows. Traders using derivatives to hedge outright exposure, or to work volatility arbitrage, will need to adapt strike selection and adjust timing windows accordingly.
Economic theory surrounding tariffs remains conflicted, but the market translation is clearer—initiatives framed as protective often translate into upward cost pressures, slower expansion within international revenue segments, and erratic capital flows. For positioning purposes, the timing—so close to a domestic political cycle—implies a patchy policy environment. Traders should bake in non-linearity over the next quarter; hedge consistency cannot be based merely on formed correlations. Breaking headlines, sometimes within minutes, have been erasing multi-day trends.
We’re paying attention to the next two non-farm payroll reports, as labour market strength could either cushion retail weakness or amplify it, depending on wage distribution across trade-driven sectors. Derivative strategies focused on sector rotation, or those tied to earnings dispersion, should reflect this transition. A blanket index exposure may underperform tactically deployed pair trades or ratio spreads amongst directional outliers. Filtering through names with quantifiable tariff exposure remains useful, but timing entries based on headline sensitivity thresholds could provide sharper setups.
The next options expiration will likely carry elevated gamma metrics around those names most susceptible to import fluctuation. Skews will widen disproportionately where earnings are due near the April tariff start date. Be selective when entering trades intended to last multiple weeks; the policy stance may alter again before expiry, and markets now have a short memory for forward guidance when macro tone is this fragmented.
