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 trade war that just included China’s retaliation, Powell reiterated a wait-and-see approach on rates. The S&P 500 was on pace for its worst two-day rout since March 2020, down 4.5% Friday. The Nasdaq 100 was set for a bear market. Treasury 10-year yields sank nine basis points to 3.94%. Money markets fully priced in four Fed reductions this year and the chance of a fifth. The dollar rose about 1%.