Wall Street saw the first surge in risk aversion after Donald Trump‘s election victory last week, as concerns grew over potential tariffs and trade policy shifts spurred by the incoming administration’s key appointments.

Trump is reportedly considering Sen. Marco Rubio (R-Fla.) for secretary of state and Rep. Mike Waltz (R-Fla.) for national security advisor. Both are vocal hawks on China and NATO, raising concerns of a tougher U.S. stance that could strain key geopolitical and trade relationships.

Adding to the cautious sentiment, investors are bracing for Wednesday’s key inflation data release, with economists forecasting the annual rate to hit 2.6% in October.

As of midday trading in New York, none of the major U.S. equity indices posted gains, while small caps underperformed, with the Russell 2000 down 1.5%. Ten out of 11 S&P 500 sectors traded in the red, with consumer staples the only marking tiny gains.

Chinese stocks suffered steep declines, with major U.S.-listed companies falling between 5% and 9% as worries over potential tariffs spooked investors.

The dollar, viewed as a hedge against tariff risk, strengthened, with a currency-weighted index reaching its highest level since May 2024.

The Japanese yen slipped past 154.7 per dollar, fully erasing gains from the Bank of Japan’s August intervention, while the Chinese yuan and the euro also weakened, with the euro falling below $1.06.

Treasury yields climbed, with the 10-year Treasury yield up eight basis points to 4.42%, pushing the popular iShares 20+ Year Treasury Bond ETF TLT down 1.2%.

The cryptocurrency market also faced pressure, with Bitcoin BTC/USD down 1.6%. Gold dropped for a third straight day, weighed down by a stronger dollar and higher Treasury yields, as it struggled to attract safe-haven inflows.

According to Benzinga Pro data:

• The SPDR S&P 500 ETF Trust SPY fell 0.4% to $596.29.
• The SPDR Dow Jones Industrial Average DIA fell 0.7% to $440.41.
• The tech-heavy Invesco QQQ Trust Series QQQ inched 0.4% lower to $511.95.
• The iShares Russell 2000 ETF IWM fell 1.6% to $237.82.
• The Consumer Staples Select Sector SPDR Fund XLP outperformed, rising 0.1%. The Materials Select Sector SPDR Fund XLB lagged, down 1.6%.

Stocks moving on earnings reports were:

• Home Depot Inc HD, down 0.5%,
• Shopify Inc. SHOP, up 26%,
• Tyson Foods Inc. TSN, up 9%,
• Live Nation Entertainment Inc. LYV, up 4.4%.

Companies reporting their results after the close are Spotify Technology S.A. SPOT, Occidental Petroleum Corp. OXY, Flutter Entertainment plc FLUT, Natera Inc. NTRA. CAVA Group Inc. CAVA.

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Photo: Owlie Productions via Shutterstock