United States (U.S.) stocks fell, Bitcoin stumbled, and Wall Street’s fear gauge reached its highest level this year as concerns over President Donald Trump’s economic policy led to a broad market sell-off on Monday.
The weakening on Wall Street began early, with all three main indexes sharply in the red at the start. U.S. stocks declined throughout the day and, despite a brief afternoon rally, ended in negative territory.
The Dow closed down 890 points, or 2.08%, retreating after losing more than 1.100 points at one point. The broader S&P 500 also fell, weakening by 2.7%, while the tech-heavy Nasdaq Composite dropped 4%.
The Dow and S&P 500 each recorded their worst day of the year. The Nasdaq saw its largest single-day drop since September 2022.
The downturn extended a miserable month for the markets, where all three main indexes erased their gains since the U.S. presidential elections in November.
The widespread sell-off was mainly driven by concerns over the impact of Trump’s tariffs. In an interview aired on Sunday, Trump said the U.S. economy would go through a “transition period” and refused to rule out a recession.
When asked whether he expected a recession this year, Trump said, “I hate to predict such things. There is a transition period because what we are doing is very big.”
Tech stocks led the sell-off, weighing down the S&P 500 and dragging the Nasdaq into correction territory. The S&P 500 closed 8.6% below its record high from February 19th.
The “Magnificent Seven” tech stocks – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla – all ended in the red on Monday.
“President Trump’s comments, which do not necessarily take recession off the table, unsettled investors who were already nervous,” said Anthony Saglimbene, chief market strategist at Ameriprise.
Tesla closed down 15.4% on Monday. After the U.S. presidential elections in November, Tesla’s shares had risen. However, Tesla’s stock has fallen nearly 45% this year, wiping out its November gains.
The company’s shares took a major hit in recent weeks amid protests against CEO Elon Musk over his outsized role in Trump’s administration, as well as declining sales in Europe.
Nvidia fell 5%, while Palantir, another artificial intelligence (AI)stock market star, dropped 10%.
“When stocks stretch too far on the upside, they also stretch too far on the downside,” said Gina Bolvin, president of Bolvin Wealth Management Group.
The VIX, Wall Street’s fear gauge, rose to its highest level this year. According to CNN’s Fear & Greed Index, “extreme fear” has been the dominant market sentiment over the past two weeks.
Bitcoin slipped to around 78.000 dollars on Monday, its lowest level since November.
Stocks have been falling this month due to uncertainty over Trump’s tariff policy and its implementation. The S&P 500 slid 3.1% last week, marking its worst week since September.
“The stock market is losing confidence in Trump 2.0 policies,” said Ed Yardeni, president of Yardeni Research.
Trump has threatened steep tariffs on imports from Canada and Mexico but later announced a delay until April 2nd. He doubled tariffs on all Chinese imports to 20% from 10%, and a 25% tariff on all steel and aluminum imports is set to take effect on March 12th.
Additionally, last week, Trump threatened to impose a 250% tariff on Canadian dairy products and “terribly high” tariffs on their lumber. On Sunday, he said that tariffs could still “increase over time.”
Cracks are also forming elsewhere: layoffs are increasing, hiring is slowing, consumer confidence is declining, and inflation is rising.
The yield on the U.S. 10-year Treasury bond fell to 4.225% as investors rushed to buy government bonds, signaling concerns over uncertainty and economic growth.
A recession is typically defined by two consecutive quarters of negative GDP growth. The Business Cycle Dating Committee of the National Bureau of Economic Research, the official arbiter, states that a recession “involves a significant decline in economic activity that is widespread across the economy and lasts for more than a few months.”
“How long this period of investor caution will last depends on how quickly global trade uncertainties and the resulting recession threat dissipate,” said Sam Stovall, chief investment strategist at CFRA Research, in a note on Monday, Klix.ba writes.
