Market Downturn Overview

On Monday, investors witnessed a steep decline in Wall Street stocks, prompted by growing apprehension about the potential repercussions of President Donald Trump’s economic policies. The S&P 500 index fell by 2.7%, following a 3.1% decrease the previous week, marking its most severe weekly loss in six months.

The Nasdaq Composite saw an even sharper decline, plummeting 4.1%. This drop positions it for its worst daily performance in over two years and pushes it down more than 13% from its peak in December, placing it firmly in correction territory.

Expert Insights on the Sell-off

Equity strategist at Citigroup, Drew Pettit, remarked, “This big sell-off feels ugly, it feels nasty.” He attributed the downturn to high investor sentiment that is now being recalibrated in light of new economic risks, particularly surrounding consumer health and Trump’s trade agenda.

Sector Performance Highlights

The financial sector experienced significant losses, with major banks like Morgan Stanley, Citigroup, and Goldman Sachs all dropping over 5%. Additionally, private investment firms KKR and Ares saw declines of 7.5% and 9.5%, respectively.

The technology sector was not spared, with Tesla’s shares falling by 14%, erasing all gains made since Trump’s election and now down over 50% from its December highs. Similarly, Nvidia, a leader in chip manufacturing with strong ties to the AI sector, experienced a 5.3% drop.

Shep Perkins, CIO at Putnam Investments, noted, “What we’re seeing today is that people are selling what they own,” particularly within AI-focused companies.

International Market Reactions

The negative trends were not confined to U.S. markets; shares across Europe and Asia also felt the impact. The Stoxx Europe 600 index decreased by 1.3%, influenced primarily by declines in the banking and technology sectors. Meanwhile, the DAX index in Germany, which recently reached record highs, fell by 1.7%.

Safe Havens and Market Sentiment

In response to the market turbulence, U.S. Treasuries rallied as investors sought safe-haven assets. The yield on the 10-year Treasury dropped by 0.09 percentage points to 4.23%.

The VIX index, a barometer of market volatility, spiked to its highest level since mid-December, reflecting heightened investor anxiety. Concerns about the economic impact of ongoing trade tensions were exacerbated by stagnant job growth data released on Friday.

Future Predictions and Economic Implications

Retaliatory measures from China, imposing tariffs on approximately $22 billion worth of U.S. goods, began on Monday, signaling potential further complications for trade relations. Treasury Secretary Scott Bessent acknowledged a possibility of economic slowdown when he stated, “Could we be seeing that this economy that we inherited starting to roll a bit? Sure.”

Analysts are adjusting their growth forecasts, with Goldman Sachs revising its projection for U.S. economic growth down to 1.7% from an earlier estimate of 2.4%. The recent market downturn signals a stark change from previous optimism, underscoring the impact of tariffs on both domestic and international economic expectations.