Stocks closed at session lows Friday as President Trump's announced threat to impose tariffs on Mexican imports, along with worries about the ongoing U.S.-China trade war, sent investors running for cover.
The Dow Jones Industrial Average, which saw its sixth straight weekly loss, fell 355 points, or 1.41%, to 24,815, the S&P 500 sank 1.32% to 2,752, and the Nasdaq retreated 1.51% 7,453. All three indexes had their worst month of the year.
The 10-year Treasury yield was 2.13%.
The new tariffs will begin at a rate of 5% starting June 10. Tariffs would then rise to 10% on July 1, 15% on Aug. 1, 20% on September 1 and 25% on Oct. 1 if Mexico doesn't take sufficient actions to stem what Trump has described as a wave of illegal immigration from Central America.
"The latest tariff threat with Mexico was quite unexpected, as we've been hearing how well discussions have been going with both Canada and Mexico," said Ryan Detrick, senior market strategist for LPL Financial. "This is just the latest worry to put on the fire for investors. The big question at the end of the day though is can we really fight two trade wars at the same time?"
Business groups, including the U.S. Chamber of Commerce, are considering suing the White House over the tariffs, CNBC reported.
"Imposing tariffs on goods from Mexico is exactly the wrong move," Neil Bradley, executive vice president and chief policy officer, said in a statement. "These tariffs will be paid by American families and businesses without doing a thing to solve the very real problems at the border. Instead, Congress and the president need to work together to address the serious problems at the border."
Automakers were especially hard hit by the tariff threat. General Motors (GM - Get Report) , which has the biggest U.S. presence in Mexico, fell 4.3% to $33.34, while Ford (F - Get Report) , which has ramped up electric vehicle production in Mexico while unveiling sweeping global job cuts, saw its shares fall 2.3% to $9.52 a share.
"Automakers may indeed see large financial impact and uncertainty from the tariffs, as all major OEMs (original equipment manufacturer) import a considerable portion of the vehicles they sell in the U.S. from Mexico," Deutsche Bank research analyst Emmanuel Rosner said in a research note. "They also use large content imported from Mexico in the vehicles they produce in the U.S."
Ultimately, Rosner wrote "we believe the tariffs on vehicles would undoubtedly be passed on to consumers, which would raise the price of vehicles sold in the U.S. by an average of about $1,300."
"We have a president who thinks that tariffs are simple, easy and without any consequence to any company that is doing business in that country, because it should be doing business here," said TheStreet's founder Jim Cramer on Real Money. "We have a president who is now at odds with every trading lesson we have learned and every market that had been open to us. We have a president who has a trading policy that is rash, unthinkable and almost designed to make the markets crash."
Shares of Uber Technologies (UBER) rose 1.5% to $40.41 after the company reported a first-quarter loss of $1.01 billion, or $2.26 a share, on revenue of $3.1 billion in its first earnings report as a public company.
Gap Inc. (GPS - Get Report) fell 9.3% to $18.68 after its first-quarter earnings and sales missed analysts' expectations and the retailer cut its fiscal-year forecast. Gap Inc. is Real Money's Stock of the Day.
Behind the Label: The History of Gap, a Classic Clothing CompanyCostco (COST - Get Report) fell just under 1% to $239.58 after the wholesale shopping club company said it may have to raise prices in order to offset potential tariffs on China imports even as it posted stronger-than-expected third quarter earnings.
Behind the Label: What You Don't Know About CostcoNutanix (NTNX - Get Report) shares plummeted 14% to $28.07 after a grim earnings report showed a downtick in revenue and disappointing outlook for the cloud storage firm.
In economic news, prices on consumer purchases excluding food and energy rose by 0.25% in April, the most since October 2017, the Commerce Department said.
The University of Michigan said its consumer sentiment index was 100, up from the prior month's 97.2 but below economists' forecasts of 101.5. Richard Curtin, the survey's chief economist, said confidence significantly eroded in the last two weeks of May "due to unfavorable references to tariffs."