By John Towfighi and Lucy Bayly, CNN
A trader works on the floor of the New York Stock Exchange. Photo: AFP / Charly Triballeau
US stocks plunged, bitcoin stumbled and Wall Street's fear gauge hit its highest level this year as concerns about President Donald Trump's economic policy led to a widespread market selloff.
The rout on Wall Street on Monday (Tuesday NZT) started early, with all three major indexes opening sharply in the red. US stocks slid throughout the day and, despite a brief afternoon rally, closed in the red.
The Dow closed lower by 890 points, or 2.08%, pulling back from a loss of more than 1100 points at one point.
The broader S&P 500 also plunged, dropping by 2.7%, while the tech-heavy Nasdaq Composite plummeted 4%.
The Dow and S&P 500 each posted their worst day of the year. The Nasdaq posted its biggest single-day decline since September 2022.
The rout extended a miserable month for markets that has seen all three major indexes wipe out their gains since the US presidential election in November.
The widespread selloff was mostly driven by anxiety about the impact of Trump's tariffs. In an interview that aired Sunday, Trump said the US economy would see "a period of transition" and refused to rule out a recession.
When asked on Fox News' Sunday Morning Futures With Maria Bartiromo if he was expecting a recession this year, Trump said "I hate to predict things like that. There is a period of transition because what we're doing is very big."
Tech stocks led the selloff, weighing on the S&P 500 and dragging the Nasdaq into correction territory. The S&P 500 closed down 8.6% from its record high on February 19.
The "Magnificent Seven" of tech stocks - Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla - were all in the red on Monday (local time).
"President Trump's comments not necessarily taking a recession off the table unnerved investors who were already unnerved," said Anthony Saglimbene, chief market strategist at Ameriprise.
Tesla stocks slid more than 10 percent. Photo: PATRICK PLEUL / AFP
Tesla erases post-election gains
Tesla closed down 15.4% on Monday. After the US presidential election in November, shares of Tesla surged. However, Tesla stock is down almost 45% this year, wiping out its gains since November.
The company's shares have taken a massive hit in recent weeks amid protests against CEO Elon Musk for his oversized role in the Trump administration, as well as slumping sales in Europe.
Nvidia fell 5% and Palantir (PLTR), another star of the artificial intelligence trade, slid 10%.
"When stocks overextend on the upside, they overextend on the downside," said Gina Bolvin, president of Bolvin Wealth Management Group, in an email.
The VIX, Wall Street's fear gauge, surged to its highest level this year. "Extreme fear" has been the sentiment driving markets for the past two weeks, according to CNN's Fear and Greed Index.
"This uncertainty has been swirling in the market," Saglimbene said.
Bitcoin slid to around $78,000 on Monday - its lowest level since November - amid a selloff of risky assets.
Tariff uncertainty spooking Wall Street
Stocks have been hammered so far this month amid uncertainty around Trump's on-again, off-again tariff policy. The S&P 500 slid 3.1% last week, posting its worst week since September.
"The stock market is losing its confidence in the Trump 2.0 policies," said Ed Yardeni, president of Yardeni Research.
Trump threatened a massive tariff on imports from Canada and Mexico but then announced a reprieve until 2 April. He doubled the tariff on all Chinese imports to 20% from 10%, and a 25% tariff on all steel and aluminum imports is set to take effect March 12. In addition, Trump threatened last week to enact a 250% tariff on Canadian dairy products and a "tremendously high" tariff on its lumber. On Sunday he told Fox that tariffs may still "go up as time goes by."
"The talk of tariffs is, in a lot of ways, worse than the implementation of them," said David Bahnsen, chief investment officer at the Bahnsen Group. "The tariff talk, reversal, speculation, and chaos only fosters uncertainty."
"I do not believe the administration knows how the tariff situation will play out, but if I were a betting man I would say that it will persist long enough to do damage to economic activity for at least a quarter or two, and ultimately result in a deal with different countries that make everyone wonder why we went through all the fuss," he said in a note Monday.
And cracks are forming elsewhere: Layoffs are mounting, hiring is slowing, consumer confidence is eroding and inflation is picking up.
The yield on the 10-year US Treasury slid to 4.225% as investors snapped up government bonds, signaling concerns about uncertainty and economic growth.
Looking ahead this week, investors will be attuned to monthly inflation data expected on Wednesday and Thursday to gauge whether inflation remained stubborn in February.
A recession is commonly defined by two consecutive negative quarters of gross domestic product growth. The National Bureau of Economic Research's Business Cycle Dating Committee, the official arbiters, says a recession "involves a significant decline in economic activity that is spread across the economy and lasts more than a few months."
"How long this period of investor caution persists depends on how quickly it will take the global trade clouds, and the resulting threat of recession, to dissipate," said Sam Stovall, chief investment strategist at CFRA Research, in a note Monday.
- CNN
