Stocks tumbled on Monday, on track for their worst day of the year, with investors gripped by angst about the economy after President Trump refused to rule out the possibility that his policies could trigger a recession.
The S&P 500 slid 3.3 percent, the sharpest daily decline in a three-week long stretch of selling. The index is now more than 9 percent below a record set last month, and approaching a “correction,” a Wall Street term for a decline of 10 percent or more from a recent high.
Over the past few weeks, Mr. Trump has threatened, imposed, suspended and resumed tariffs on America’s largest trade partners: Canada, Mexico and China. The dizzying shifts, including last-minute exemptions for some automakers and energy products, have unnerved investors.
“The market volatility is much less about the bad news of tariffs and much more about the uncertainty of tariffs, especially uncertainty as to what the policy is, where it is headed, how long it will last and what the end result will be,” said David Bahnsen, the chief investment officer at the Bahnsen Group.
On Monday, retaliatory tariffs by China on U.S. agricultural products came into effect. On Wednesday, the Trump administration is set to put in place a 25 percent tariff on all U.S. steel and aluminum imports. Mr. Trump has also threatened to impose “reciprocal tariffs” on all U.S. imports to match other countries’ tariffs and trading policies next month.
The S&P 500 has now erased all the gains it made since Election Day. The Nasdaq has been hit even harder, as a rally in big tech stocks driven by enthusiasm for artificial intelligence reversed course. The index fell into a correction last week, and dropped more than 3 percent on Monday.
“There’s just no support in the tech stocks right now,” said Larry Tentarelli, the chief technical strategist at Blue Chip Daily Trend Report.
Many tech companies have grown so large that movements in their stocks have an outsize influence on the broader market. On Monday, several of the biggest companies were down sharply: Tesla plunged more than 11 percent, adding to a losing streak that’s come amid falling sales and as investors worry that its chief executive, Elon Musk, has been distracted by his role in the Trump administration. Alphabet, Apple and Nvidia each fell over 4 percent.
Stocks in Europe and Asia were also under pressure but the declines paled in comparison to losses on Wall Street. An index tracking the eurozone’s largest public companies, which hit a record last week, dropped 1.3 percent. Hong Kong’s Hang Seng Index fell more than 1.8 percent.
Investors seeking havens continued to opt for the relative safety of bonds, pushing down the 10-year U.S. Treasury yield to 4.23 percent; bond prices move inversely to yields. The combination of falling stocks and declining interest rates is often seen as a sign of economic unease. Oil prices also fell, another signal of concern about the broader economy.
Those worries are also reflected by traders’ bets that the Federal Reserve will resume cutting the rate it controls, pricing in three such cuts this year, according to CME FedWatch. Stock investors generally embrace rate reductions, which lower the cost of borrowing for businesses and consumers, but not when they are spurred by concerns about the economy.
In a Fox News interview that aired on Sunday, Mr. Trump was asked about “rising worries about a slowdown,” by host Maria Bartiromo. He described what might follow as “a period of transition,” and didn’t rule out the possibility that his policies would cause a recession. Asked during the interview when businesses might have clarity on the on-again, off-again tariff policies, Mr. Trump responded by suggesting that more tariffs could come.
“We may go up with some tariffs. It depends. We may go up. I don’t think we’ll go down, or we may go up,” he said. “They have plenty of clarity.”
By most measures, the U.S. economy is still in good shape. On Friday, the latest data on hiring showed that employers continue to add workers at a healthy pace.
But economists have turned gloomier as they come to grips with Mr. Trump’s seesawing approach to tariffs, which has hamstrung businesses trying to plan investments and hiring. Cuts to the federal work force and government spending freezes have also dented consumer sentiment.
“The markets are scared of the uncertainty that the tariff rhetoric is bringing,” said Andrew Brenner, head of international fixed income at National Alliance Securities.
A report on inflation due this week will be closely watched, as surveys of consumers suggest that they expect price increases to pick up, a potentially worrying sign for the Fed as it tries to bring inflation down further. The rising cost of eggs and other necessities has squeezed shoppers’ wallets, and tariffs and mass deportations could push prices higher.
Given a murkier outlook for the American economy, “the recent moves might well have further to go,” Jan Hatzius, the chief economist at Goldman Sachs, said in a note on Monday. Strategists at the bank recently increased the chances of a U.S. recession in the coming year to 20 percent.
Analysts at JPMorgan Chase warned in a report that the spillover from a possible U.S. slowdown has resulted in a “materially higher risk of a global recession this year due to extreme U.S. policies.” They put the probability of such a downturn at 40 percent.
