A selloff in stocks deepened, bonds surged and oil hit a four-year low as Federal Reserve Chair Jerome Powell signaled the damage of a trade war will be bigger than anticipated, with the potential effects including higher inflation and slower growth.

Despite the economic risks from President Donald Trump’s widening trade war that just included China’s retaliation, Powell continued to reiterate a wait-and-see approach on rate cuts. The S&P 500 was on pace for its worst two-day rout since the Covid lockdowns of March 2020, down 5% Friday. The Nasdaq 100 was set for a bear market. Treasury 10-year yields sank 11 basis points to 3.92%. Money markets fully priced four rate reductions this year. The dollar rose almost 1%.