US stocks fell and Treasuries rose after Donald Trump promised to impose substantial steel tariffs, drawing a rebuke from a manufacturing industry group.
The decision comes just weeks after the U.S. Commerce Department indicated that tariffs against foreign producers were necessary to safeguard the country's national security interests.
Kohl's Corp.(KSS) shares dropped 6.4% after disappointing quarterly earnings.
"We just need to take a deep breath", said Omair Sharif, senior USA economist at Societe Generale in NY.
Trump made the announcement during a meeting at the White House with executives from both the steel and aluminum industries, which he promised to help rebuild by shielding them from unfair trade practices.
Federal Reserve Chairman Jerome Powell, in his first public appearance as head of the USA central bank, vowed on Tuesday to prevent the economy from overheating while sticking with a plan to gradually raise interest rates.
Powell said the Fed expects to continue to hiking rates gradually as it looks to keep economic growth in check while not thwarting the recovery. "Four (rate hikes) this year is now the consensus I think", Tuz said.
But it was the tariff issues that was spinning the market lower as the afternoon wore on.
A fall in new orders for US -made capital goods for the second month in a row, plus the dismal Chinese and Japanese numbers, are also making investors fret about a possible setback to growth, especially in China, the world's No. 2 economy.
USA gold futures settled down 70 cents or 0.1 per cent, at US$1,317.90 per ounce.
This year, the dollar index is still down 1.5 percent, pursued by suspicions that the Trump administration prefers a weaker dollar to fix its ballooning trade deficit.
One of the key aspects of Powell's question-time comments was his view on the "continuing strength in the labour market". Moments before his testimony began, the Dow Jones industrial average was down as much as 98.68 points to 24,930.52.
Consumer spending, which accounts for more than two-thirds of USA economic activity, gained 0.2 percent in January, while core PCE price index, the Federal Reserve's favored gauge on inflation, rose 0.2 percent compared with economists' expectation of a 0.3 percent rise.
The Nasdaq Composite Index declined 17 points, or 0.2%, to 7,254. Oil prices were still down about 0.8 percent.
The dollar held steady after hitting a five-week high against a basket of currencies overnight despite the release of weak GDP, housing and Chicago-area business activity reports.
Shares of auto makers and other big consumers of steel and aluminum added to their session losses after Trump said the USA would impose tariffs of 25 percent on steel imports and 10 percent on imported aluminum next week, while shares of US steel and aluminum companies jumped.
USA benchmark 10-year Treasury notes last rose 9/32 in price to push yields lower to 2.8351 percent.
In a question and answer session, Powell told the Senate Banking Committee on Thursday there was no evidence the US economy is overheating, and labor markets may still have room to improve.