Stocks fell on Thursday after President Donald Trump said the U.S. will implement tariffs on steel and aluminum imports next week.
The Dow Jones industrial average traded 550 points lower after rising more than 150 points earlier in the day. The S&P 500 declined 1.8 percent, with tech as the worst-performing sector. The Nasdaq composite fell 1.9 percent and broke below its 50-day moving average, a key technical level.
The U.S. will set tariffs of 25 percent for steel and 10 percent for aluminum, the president said. It is unclear whether they will apply to all imports or only metals from certain countries.
"That could really spook the market," said Marc Chaikin, CEO of Chaikin Analytics. "The biggest wildcard would be a trade war and nobody should be excited for that." Chaikin also noted some of the pressure seen in stocks is in response to the news on tariffs.
Shares of Ford Motor and General Motors traded near session lows, down more than 3 percent. Steel stocks like U.S. Steel and AK Steel traded sharply higher.
Wall Street also digested fresh testimony from Federal Reserve Chair Jerome Powell. Powell spoke before the Senate Finance Committee later on Thursday.
After delivering prepared remarks, he said: "We don't see any strong evidence yet of a decisive move up in wages. We see wages, by a couple measures, trending up a little bit, but most of them continuing to grow at about two and a half percent. Nothing in that suggests to me that wage inflation is at a point of acceleration."
The Dow, S&P 500 and Nasdaq all hit session highs on the back of that comment before retreating. Earlier this week, he testified before the House Financial Services Committee, where he indicated market volatility won't stop the central bank from raising rates.
"It is too early to make any sort of comment on his tenure, but we do suspect that Chairman Powell will be a little more willing to ruffle feathers on the Committee and use the power of his seniority to impose policy on other members," said Michael Shaoul, chairman and CEO of Marketfield Asset Management, in a note.
"If this proves to be the case then we may see rather more obvious aggressive dissent going forwards, which again may feed into a more volatile environment," Shaoul noted.
His testimony from earlier this week sent stocks reeling. The Dow closed nearly 300 points lower on Tuesday, while the S&P 500 and Nasdaq each fell more than 1 percent.
Art Hogan, chief market strategist at B. Riley FBR, said the market is trying to find its footing with the new Fed chair. "I think we'll get a better idea on monetary policy after the March Fed meeting."
Thursday marked the first trading day of March. In February, the Dow and S&P 500 snapped a streak of 10 straight monthly gains, while the Nasdaq posted its first monthly decline in eight months.
"We still see the environment as glass-half-full, although more difficult given the volatility in the market," said Lisa Erickson, head of traditional investments at U.S. Bank Wealth Management. "There is a paradigm shift in that rates are going up and they may be going up more than expected."
In economic news, the Commerce Department said consumer spending rose 0.2 percent in January, while personal income rose 0.4 percent. The core personal consumption expenditures (PCE) price index, meanwhile, advanced 1.5 percent on an annualized basis, in line with expectations.