In a tumultuous trading session on Monday afternoon, US equity indexes experienced significant declines, reflecting mounting concerns about the potential economic repercussions of recently imposed tariffs. The Nasdaq Composite suffered the steepest drop, plummeting 4.9% to close at 17,304.1, while the S&P 500 witnessed a 3.5% slump to 5,567.9.
The Dow Jones Industrial Average wasn't spared, falling 2.7% to 41,651.8. Among the various sectors, technology bore the brunt of the sell-off, leading the decliners lists, while the energy sector was the only gainer amidst the market chaos. The stocks known collectively as the "Magnificent-7", which includes giants such as Tesla (TSLA), Meta Platforms (META), Microsoft (MSFT), Alphabet (GOOG, GOOGL), Apple (AAPL), Amazon (AMZN), and Nvidia (NVDA), all faced significant downturns.
Notably, Tesla experienced a shocking 14% decrease during intraday trading, raising alarms among investors. In a recent analysis, Goldman Sachs has revised its fourth-quarter US GDP growth outlook, lowering the annualized forecast to 1.7%, down from a previously set expectation of 2.2%. Furthermore, the brokerage has raised the probability of a recession within the next 12 months to 20%, up from 15%.
However, Goldman Sachs cautioned that this estimate did not increase significantly, as they believe the White House retains the ability to reverse policy changes should risks escalate further. Goldman also highlighted that they expect larger tariffs than initially anticipated, which are likely to include product-specific tariffs and a reciprocal tariff structure extending beyond simple tariff differentials.
The firm anticipates that these enhanced tariffs will impose a greater burden on GDP moving forward. President Donald Trump, during a recent Fox News interview, did not shy away from the possibility of the US economy facing a recession by 2025, hinting at a forthcoming "period of transition" spurred by his administration's aggressive tariff policies targeting Canada, Mexico, and China. From a broader economic perspective, recent data revealed a slight uptick in median inflation expectations, which increased by 0.1 percentage points to 3.1% for the one-year forecast as per the Federal Reserve Bank of New York.
However, it remained unchanged for the three and five-year projections at 3%. In terms of treasury yields, it was a rough day for bonds as US Treasury yields fell, marked by a notable drop of 9.5 basis points for the 10-year yield, which settled at 4.22%, while the two-year rate decreased by 9.8 basis points to end at 3.9%. In corporate updates, Veren (VRN) and Whitecap Resources have entered into a merger agreement valued at approximately 15 billion Canadian dollars (around $10.39 billion), aimed at creating the largest Canadian producer focused on light oil.
The merger spurred an impressive 15% surge in Veren's shares traded on the New York Stock Exchange during Monday’s session. Meanwhile, BioNTech (BNTX) reported a decrease in fourth-quarter revenues, projecting an anticipated drop in full-year sales for 2025. In light of this, the German biopharmaceutical company announced intentions to enhance its research and development efforts to facilitate future oncology product launches.
BioNTech's American depositary receipts saw a 3.2% decline in trading on Monday. Investors are also awaiting quarterly earnings results from Oracle (ORCL), which will be released following market closure. Turning to commodities, West Texas Intermediate crude oil futures fell by 1.6%, settling at $65.97 per barrel by the end of the trading day.
Gold futures experienced a slight dip of 0.7%, trading at $2,892.6 per troy ounce, while silver also decreased, falling 1.3% to reach $32.38 per troy ounce..