*

Two-day selloff puts S&P 500 down over 17% from record

high

*

Nasdaq Composite confirmed bear market on Friday

*

Coming week sees tariff deadline, inflation data, bank

earnings

By Lewis Krauskopf

NEW YORK, April 4 (Reuters) - Tariff-stunned markets

face another week of potential tariff turmoil, with fallout from

President Donald Trump's sweeping import levies keeping

investors on edge after the worst week for U.S. stocks since the

onset of the coronavirus crisis five years ago.

Investors will look for signs the stock market may be close

to at least a short-term bottom after Trump's tariffs rocked

global asset prices this week. The benchmark S&P 500

lodged its biggest weekly drop since March 2020 and the Nasdaq

Composite on Friday ended down more than 20% from its

December record high, confirming the tech heavy index is in a

bear market. The Dow Jones Industrial Average finished

the week down well over 10% from its December record high,

marking a correction for the blue-chip index.

More volatility could be in store ahead of the April 9

deadline Trump set for his reciprocal global tariffs to take

effect, after his Wednesday announcement of the levies sent

markets into a tailspin, raising fears of a global recession.

"The playbook on this is very, very unclear for everybody,"

said Jeffrey Palma, head of multi-asset solutions at Cohen &

Steers. "There is all the questions about tariffs, retaliatory

tariffs, where this ends and where it shakes out."

With the steep slide at the end of the week, the S&P 500 was

down over 17% from its February 19 all-time closing high. In the

two days following Trump's tariff announcement, S&P 500

companies lost about $5 trillion in market value, the largest

amount ever in a two-day stretch, according to LSEG data.

"The markets could be their own worst enemy," said Matthew

Miskin, co-chief investment strategist at John Hancock

Investment Management. "This kind of drawdown ... could shake

confidence and it could actually lead to weaker economic

activity."

Trump's tariffs would amount to the highest trade barriers

in more than a century, including a 10% baseline tariff on all

imports and higher targeted duties on dozens of countries.

The trade battle escalated on Friday when China hit back

with additional tariffs of 34% on U.S. goods.

Investors downgraded their economic and earnings forecasts,

with JPMorgan ( JPM ) analysts raising the risk of a global recession

this year to 60% from 40% before.

Some investors held out hope that Trump would negotiate

deals in coming days with some countries that would roll back

some of the tariffs. Others were dubious that Trump would make

any concessions.

Despite Trump's opportunity to pivot, "it is not lost on us

that the window is shrinking and some damage to consumer and

business confidence may have been done already regardless of the

negotiated ending point to follow," Citi strategist Scott

Chronert said in a note on Friday.

One sign of gloom: The Cboe Volatility Index, an

options-based measure of investor anxiety, registered its

highest closing level since April 2020.

Bearish sentiment in the American Association of Individual

Investors survey reached 61.9%, its highest reading since 2009

during the financial crisis.

With tariffs clouding the outlook, investors are wary of

dour financial forecasts as U.S. companies kick off quarterly

reports in earnest in the coming week. S&P 500 earnings are

expected to have climbed 7.8% in the first quarter from the year

ago period, according to LSEG IBES.

Companies set to report next week include major banks

JPMorgan ( JPM ) and Wells Fargo ( WFC ) due on April 11.

"We see a lot of uncertainty in the earnings outlook at the

moment," said RBC Capital Markets strategists in a Friday note,

in which they cut their 2025 earnings forecast for the S&P 500.

The market selloff and increasing pessimism could mean the

bar is lower for news that would buoy stocks, said Keith Lerner,

co-chief investment officer with Truist Advisory Services.

"If you had anything that was even remotely positive right

now, you could see a short-term spark because people are braced

for the negative outcome," Lerner said.

Also in the coming week, the monthly consumer price index

report on Thursday could help set a baseline for U.S. inflation

ahead of the impact from tariffs, which are widely expected to

add to pricing pressures.

Investors have been factoring in more Federal Reserve

interest rate cuts this year in the wake of the tariff

announcement, with Fed fund futures accounting for 100 basis

points of easing this year, according to LSEG data.

Fed Chair Jerome Powell said on Friday that the tariffs are

"larger than expected" and the economic fallout, including

higher inflation and slower growth, likely will be as well.

Palma, of Cohen & Steers, said it was critical for markets

to show some stability in the coming days.

"We've had two really, really big days in terms of sharp

market moves," Palma said. "What we really don't want to see is

that starts to create some vicious cycle that itself

destabilizes the financial system."