NEW YORK: The tech-heavy Nasdaq led sharp losses among major US stock indexes on Monday, plunging 4% to a near six-month low, on fears that US President Donald Trump’s tariff policies would spark an economic slowdown.
The benchmark S&P 500 has fallen over 8% from its February high. The Nasdaq confirmed a correction last week, having tumbled more than 10% from its December all-time high.
Financial markets have been volatile in recent weeks as rising trade tensions and signs of slowing US economic growth weighed on consumer confidence and business activity. Richly valued US tech stocks have borne the brunt of the recent selloff on Wall Street.
“The Nasdaq has been risk-off all year long … that’s just the unfortunate combination of very high valuations, which is where we started the year, and then increased uncertainty just in general,” said Chris Zaccarelli, chief investment officer, Northlight Asset Management.
In an interview on Sunday, Trump declined to predict whether the US could face a recession, at a time when investors are concerned that his fluctuating trade policies on Mexico, Canada and China could dampen consumer demand and corporate investment.
China’s retaliatory tariffs on select US imports are set to take effect on Monday, with US tariffs on certain base metals anticipated later in the week.
The S&P 500 is also poised to close below its 200-day moving average for the first time since November 2023. Analysts view this as a crucial support level, with a break potentially signaling a larger selloff ahead.
The CBOE Volatility Index, often dubbed Wall Street’s “fear gauge,” surged over 3.6 points to hit 27, marking its highest level since December 18.
A Reuters poll showed 91% of economists see higher recession risks due to Trump’s shifting trade policies. HSBC also downgraded US stocks, citing uncertainty around tariffs.
At 1:11 p.m. ET, the Dow Jones Industrial Average fell 659.20 points, or 1.54%, to 42,139.77, the S&P 500 lost 147.97 points, or 2.56%, to 5,622.23 and the Nasdaq Composite lost 740.45 points, or 4.07%, to 17,455.77.
An analyst also pointed to tech stocks coming under pressure from a stronger Japanese yen and a spike in sovereign bond yields, as investors unwound yen carry trades on expectations of an upcoming interest rate hike in Japan.
The carry trades involve borrowing yen at a low cost to invest in other currencies and assets offering higher yields.
“The carry trade is unwinding and all that hot money was in Magnificent Seven stocks … that’s why tech is down,” said Thomas Hayes, chairman at Great Hill Capital LLC.
Heavyweight growth stocks such as Nvidia fell 5.2%, while Microsoft and Amazon.com declined around 3.2% each.
The broader technology sector fell more than 4.5%, while the small-cap Russell 2000 index dipped 2.1%.
JPMorgan Chase and Goldman Sachs also retreated, dragging down the broader banks index.
Defensive stocks such as consumer staples and utilities were marginally higher.
Tesla was down 13%, lowest since October
2024, after UBS cut its forecast for the automaker’s first-quarter deliveries.
Comments
Comments are closed for this article.