On Monday, US equity markets experienced a significant downturn, with all major indexes falling sharply due to increasing anxieties over the potential for an economic recession. The Nasdaq Composite recorded a notable plunge of 3.7%, settling at 17,523.5. Similarly, the S&P 500 fell by 2.3%, closing at 5,638.5, and the Dow Jones Industrial Average also saw a decrease of 1.2%, finishing at 42,275.1.
As a result, both the S&P 500 and the Nasdaq reached their lowest points since mid-September. The decline was broadly driven by sectors such as Communication Services, Technology, and Consumer Discretionary, which showed the most considerable losses throughout the trading session. In contrast, Energy and Utilities emerged as the top performers on an intraday basis, highlighting the contrasting dynamics within the market. Among those most affected were some of the so-called Magnificent-7 stocks, including major players like Tesla, Meta Platforms, Apple, and Nvidia.
These companies are categorized as mega-caps, defined as firms with a market capitalization exceeding $200 billion, and they were among the worst performers in the market during this downturn. Former President Donald Trump contributed to market instability when he expressed the possibility of the US economy entering a recession in 2025.
During an appearance on Fox News, he remarked on an inevitable "period of transition" due to the size and scope of current policies, contributing to the uncertainty surrounding future economic conditions. The financial landscape was further complicated last week as tariffs imposed by Trump unsettled markets.
A 25% levy on imports from Mexico and Canada raised concerns over potential price increases as a response to these punitive import duties. Further complicating matters, the administration postponed some tariffs by a month, leading to a murky outlook for supply costs. The already existing 10% import duties on China remained unchanged, maintaining the pressure on US-China trade relations as these nations are the largest trading partners with the United States. In addition to these developments, economic reports released on Monday revealed an uptick in median inflation expectations.
According to data from the Federal Reserve Bank of New York, these expectations increased by 0.1 percentage point on a one-year horizon, rising to 3.1% in February. However, expectations for the three-year and five-year horizons remained static at 3%. Federal Reserve Chair Jerome Powell commented on the economic situation, suggesting that policy restraint could persist longer if inflation does not trend sustainably towards the desired 2% target.
This statement followed a nonfarm payrolls report that indicated an uptick in the unemployment rate coupled with job growth figures that fell short of forecasts. The CBOE volatility index, known as the VIX or the fear gauge, surged by 14% to reach 26.67, reflecting heightened market anxiety. In terms of Treasury yields, there was a notable decline, with the 10-year yield plummeting by 8.8 basis points to 4.23%.
The two-year treasury also saw a drop, trading 7.3 basis points lower to settle at 3.93%. In currency markets, the US dollar weakened against the Japanese yen, depreciating by 0.5% to a rate of 147.26. The confluence of these factors has added layers of complexity to an already tumultuous economic landscape, warranting close attention from investors and analysts alike. Stock Tickers: $TSLA, $NVDA, $US30, $US500.