Wall Street stocks tumbled on Monday, as a sell-off triggered by investor concerns over the impact of President Donald Trump’s policies on the US economy intensified.
The S&P 500 index tumbled 2.7 per cent, after falling 3.1 per cent last week in its worst weekly performance in six months, as big US banks ditched their previous bullish forecasts for stocks this year.
The Nasdaq Composite sank 4.1 per cent, putting it on course for its worst day in two and a half years. It is down more than 13 per cent from its December peak, leaving it in correction territory.
“This big sell-off feels ugly, it feels nasty,” said Drew Pettit, an equity strategist at Citigroup. “We were coming off very high sentiment and very high growth expectations. All of this is just recalibrating to the new risks that are in front of us,” he said, referring to worries about the health of the US consumer and Trump’s aggressive trade policy.
The latest falls, which also dragged down markets in Europe and Asia, came after the president on Sunday declined to rule out a recession or a rise in inflation as he dismissed business concerns over lack of clarity on his tariff plans.
Banks stocks were among the hardest hit, with Morgan Stanley, Citigroup and Goldman Sachs all slipping more than 5 per cent. Shares in private investment firms KKR and Ares shed 7.5 per cent and 9.5 per cent respectively.
Tech stocks also fell sharply. Tesla, whose shares surged following Trump’s election victory in November, was down 14 per cent. It has now given up all of those post-election gains and has fallen more than 50 per cent since its December high.
Chipmaking giant Nvidia, which has been one of the biggest winners from investor enthusiasm for artificial intelligence in recent years, fell 5.3 per cent.
“What we’re seeing today is that people are selling what they own,” said Shep Perkins, chief investment officer at Putnam Investments. “And people own a lot of AI-related companies.”
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In Europe, where shares have outperformed the US this year, the Stoxx Europe 600 index lost 1.3 per cent, dragged down by banks and technology shares. Germany’s Dax, which hit a string of record highs last week after the country agreed a historic spending package, fell 1.7 per cent.
US Treasuries rallied on Monday, as investors sought safe haven assets. The 10-year yield, which falls as prices rise, was down 0.09 percentage points at 4.23 per cent.
The Vix index, known as Wall Street’s fear gauge, climbed to its highest level since mid-December.
Investors are concerned that Trump’s on-off trade war is hurting the US economy, with Friday’s disappointing jobs numbers the latest in a run of weak data.
Retaliatory tariffs from China on about $22bn of US goods, including agricultural exports, came in to effect on Monday.
Over the weekend, Treasury secretary Scott Bessent provided little in the way of reassurance to worried investors as he acknowledged signs of US economic weakness. “Could we be seeing that this economy that we inherited starting to roll a bit? Sure,” he told CNBC.
Trump and Bessent seem to be prepared for “some pain to reorientate the economy”, said Deutsche Bank’s Jim Reid. “Taken at face value, these quotes suggest that their pain level is higher than most would’ve believed a few weeks ago.”
Goldman Sachs on Monday downgraded its growth prediction for the US economy to 1.7 per cent, compared with 2.4 per cent at the beginning of the year, as its trade policy assumptions have become “considerably more adverse.”
The equity market falls of recent weeks mark a sharp reversal from the mood late last year and earlier this year, when hopes of deregulation and tax cuts under Trump fuelled a market rally.
Instead, duties on goods from trading partners such as Canada, Mexico, China and the EU have led investors to rein in their bets and driven many into cutting risk.
The S&P could drop almost 20 per cent from its current level if “growth falls off more significantly and recession becomes likely,” said Morgan Stanley’s chief US equity strategist Michael Wilson in a note to clients on Monday. “We are not there, but things can change quickly.”
JPMorgan believes the index could fall as low as 5,200 — a near-10 per cent drop from current levels — owing to “trade uncertainty”, while analysts at Citi believe the fallout from Trump policies can push the S&P down to 5,500 points. In December, an average of 10 global banks expected the index to climb roughly 10 per cent in 2025 to about 6,550 points.
Chinese consumer prices fell in February for the first time in 13 months, in the latest sign of weakness for the world’s second-largest economy. The CSI 300 index closed down 0.4 per cent, while the Hang Seng index dropped 1.9 per cent, although it is still up around 19 per cent this year.
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