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Indexes down: S&P 500 4.07%, Nasdaq 4.07%, Dow 3.49%

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Nasdaq drops 20% from all-time closing highs

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Powell warns of tariff impact on inflation

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March payrolls beat expectations

(Updates to mid-session trading)

By Sruthi Shankar and Pranav Kashyap

April 4 (Reuters) -

Wall Street fell sharply for a second straight session on

Friday, pushing the Nasdaq toward a

bear market

, after China imposed fresh tariffs on all U.S. goods in

response to the Trump administration's

sweeping levies

, escalating a global trade war.

China's finance ministry said on Friday it would impose

additional tariffs of 34% on all U.S. goods from April 10 after

U.S. President Donald Trump raised tariff barriers to their

highest level in more than a century this week.

The tariff war has sent shockwaves through global

financial markets and raised fears of an economic downturn, with

investment bank JP Morgan

forecasting

a 60% chance of the global economy entering a recession by

year-end, up from 40% previously.

The Nasdaq Composite fell 4.07% to 15,877.69 by

11:36 a.m. ET, shedding 20% from its all-time closing high

touched in December. If the index closes below that mark, it

would confirm a bear market.

The S&P 500 and the Nasdaq were poised to mark their

biggest weekly drop since March 2020, and the Dow was on course

for its biggest weekly decline since October 2020.

"Recession risk is a significant concern here. Tariffs

could wipe out growth and markets are reflecting that. This bull

market picture that we had in front of us is now being

completely rewritten," said Dana D'Auria, co-chief investment

officer at Envestnet.

Wall Street's main indexes posted their biggest

single-day percentage declines in years on Thursday after Trump

imposed a 10% tariff on most imports into the United States and

much higher levies on dozens of other countries.

Investors have shunned riskier assets including stocks

and commodities in recent weeks on bets that the tariffs will

spark an economic slowdown, prompting them to seek safer assets

such as government bonds and gold.

Federal Reserve Chair Jerome Powell on Friday

highlighted

that Trump's unexpectedly hefty tariffs could trigger

higher inflation and slower growth, setting the stage for

challenging decisions ahead for the central bank.

Traders continued to anticipate a more accommodative

policy from the U.S. central bank, with money market futures

pricing in cumulative rate cuts of 100 basis points by the end

of this year, compared with about 75 bps a week earlier.

The Dow Jones Industrial Average fell 3.49% to

39,128.86 points, dropping 10% from its record close and on

course to confirm a

correction

. The S&P 500 dropped 4.07% to 15,877.69.

U.S.-listings of Chinese companies dived, with JD.com

and Alibaba and Baidu shedding over 9%

each.

Companies with exposure to China also fell across the

board, with mega-caps such as Apple ( AAPL ) falling 4.7%.

The CBOE Volatility index, known as Wall Street's

fear gauge, hit its

highest level

in eight months at 34.71 points.

U.S. bank stocks dropped further on Friday, with

the sector under pressure globally, as investors anticipated

more interest rate cuts from central banks and a hit to economic

growth from tariffs.

The yield on the benchmark 10-year Treasury notes

was down to a six-month low of 3.938%.

A Labor Department report showed the U.S. economy added far

more jobs than expected in March, but Trump's sweeping import

tariffs could test the labor market's resilience in the months

ahead amid sagging business confidence.

Declining issues outnumbered advancers by an 8.82-to-1

ratio on the NYSE and a 6.38-to-1 ratio on the Nasdaq.

The S&P 500 posted 10 new 52-week highs and 138 new lows

while the Nasdaq Composite recorded 11 new highs and 946 new

lows.