As tariffs roil the markets, here's why some sectors are faring worse than others
Though tech stocks saw big losses and rebounds, consumer staples were slightly more stable
Stock markets sank for the third day Monday after U.S. President Donald Trump announced sweeping global tariffs last week, and no one is coming out unscathed — but some sectors are seeing more volatility than others.
All three major U.S. indexes touched their lowest levels in more than a year in early trading on Monday, before rebounding somewhat, with the S&P 500 and the Dow Jones closing lower and the Nasdaq gaining 0.10 per cent.
Here's a quick look at how some of the market's sectors are faring.
Tech stocks see plummets and rises
Technology stocks have been some of the hardest hit in the market sell-off.
The Magnificent Seven — a group of seven high-performing tech stocks including Apple, Microsoft and Nvidia — have seen $2 trillion US of their combined value wiped out in the market's recent slide.
On Monday, a rebounding of tech stocks helped to raise the S&P 500. Chip manufacturer Nvidia recovered from a more than seven per cent stumble in morning trading and was up 3.5 per cent at market's close.
But overall, sectors like tech that rely on international supply chains are going to be more heavily affected by tariffs, according to Sebastien Betermier, an associate professor of finance in the Desautels Faculty of Management at McGill University.
Apple, for instance, lost 3.67 per cent of its value by market close on Monday after dropping more than five per cent earlier in the day.
A lot of Apple's hardware production takes place in China, and Betermier told CBC News that because of all the tariff action — Trump placed a 34 per cent tariff on China last week, on top of those announced earlier in the year, and China retaliated by announcing a matching 34 per cent tariff on U.S. goods — Apple is getting hit by "a bit of a double whammy."
Though the company has made efforts in recent years to diversify its supply chain beyond China, other countries that make Apple products are also being targeted by the U.S. tariffs, with India and Vietnam facing tariffs of 26 per cent and 46 per cent, respectively.
And further blows to the tech industry fuelled by the U.S.-China feud could be on the way as Trump threatened Monday to place an additional 50 per cent tariff on China if Beijing does not withdraw its retaliatory tariffs on the U.S.
Consumer staples slightly more stable
One sector that's seen less severe drops in market value during the recent turmoil is consumer staples such as groceries.
"You can look at the top performing stocks on the Toronto exchange over the last month or so," said Barry Schwartz, chief investment officer at Baskin Wealth Management, pointing to grocers and utilities such as Hydro One and Toronto Hydro. "People have to pay for those things or your lights go out. You have to [buy] groceries or you don't eat."
He told CBC News that the necessity of consumer staples means that they "tend to do well in choppy markets."
For instance, Costco rose into the green, then dipped again repeatedly throughout Monday, before closing down by 0.91 per cent, a far less intense drop than some of the tech stocks.
Although it's a more "resilient" sector, Betermier noted that retail is still impacted by supply chain disruptions.
"A lot of what we consume ultimately is made abroad."
Outlook for retail, transportation shaky
Betermier says sectors with very thin-profit margins, like retail, are often some of the most impacted by tariffs.
"When you have a tariff, either you keep the same prices and ultimately, because of that extra tax, the consumer pays more, or you bring down the price [and] eat into your profit margin to try to make it still accessible to the consumers," he explained.
"But if you don't have much of a profit margin to begin with, you have less room to manoeuvre."
Retail is also another sector where supply chain concerns are huge. Nike, which dropped four per cent on Monday in one of the larger losses in the market, makes much of its shoes and apparel in China, where it also sells a lot of product.
Although transportation isn't a sector directly impacted by tariffs, Betermier says continued tension between the U.S. and Canada means people might cut down on travel between the two countries, which could result in a downturn.
"If the tariffs do indeed lead to reduced demand for these sectors, like in transportation, well then that's going to be a loss down the road in terms of future revenue for those firms," he said.
Some airline stocks have been falling for months. United Airline Holdings, for instance, is currently trading at about half of what it was in January.
Larry Fink, chief executive of BlackRock, the world's largest asset manager, says he's already hearing from U.S. airline executives who say they're seeing huge impacts from the decline in travel demand.
"Most CEOs I talk to would say we are probably in a recession right now," Fink said in an interview Monday at the Economic Club of New York.
"We're seeing, in very different sectors, a real downturn."
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With files from Reuters and The Associated Press