US stocks tumbled Monday as ongoing tariff disputes and concerns over a potential federal government shutdown fueled fears of a looming recession.
Last week’s sharp selloff continued, gaining steam throughout the session, with all three major indexes posting steep losses.
The S&P 500 is now down over 8% from its February 19 all-time high, and the Nasdaq Composite has officially entered correction territory after falling more than 10% from its December peak. A mix of economic uncertainty, fears of a potential recession, and escalating trade tensions has led to a wave of selloffs, wiping out trillions in market value.
Key factors contributing to this decline include high stock valuations compared to historical averages, economic uncertainty triggered by shifting trade policies, and disappointing corporate earnings. Tesla, for example, saw its market value drop by more than $125 billion in a single day. Additionally, companies like Delta Air Lines have cut their profit forecasts, citing concerns over economic conditions. Investors remain on edge as they monitor upcoming inflation reports, interest rate policies, and potential government actions to stabilize the economy.
1. Why are US stock markets falling?
The recent selloff is driven by multiple factors, including trade policy uncertainties, fears of a potential recession, and concerns over high stock valuations. As Peter Orszag, CEO of Lazard, explains: “The amount of uncertainty that has been created by the tariff wars with regard to Canada, Mexico and Europe is causing boards and C-suites to reconsider the pathway forward.”
2. How much has the market lost so far?
The S&P 500 has fallen over 8.6% from its February 19 high, erasing more than $4 trillion in market value. The Nasdaq Composite is officially in correction territory, down over 10% from its December peak.
3. Which stocks have been hit the hardest?
Technology stocks have suffered the most significant losses. Tesla lost $125 billion in value in a single day, while Apple and Nvidia both fell about 5%. The S&P 500’s technology sector dropped 4.3% overall. Meanwhile, Delta Air Lines’ stock plunged 14% after it cut its first-quarter profit estimates by half.
4. Are investors worried about a recession?
Yes, investor concerns about a potential recession have intensified. Ross Mayfield, an investment strategist at Baird, noted:
“The Trump administration seems a little more accepting of the idea that they’re OK with the market falling, and they’re potentially even OK with a recession in order to exact their broader goals.”
5. How has the White House reacted to the market turmoil?
The White House has pushed back against recession fears, insisting that the economy remains strong despite the market downturn. Kevin Hassett, head of the National Economic Council, said: “There are a lot of reasons to be extremely bullish about the economy going forward. But for sure, this quarter, there are some blips in the data.”
He also suggested that the uncertainty around tariffs would be resolved soon, emphasizing that tax cuts would help boost investment and real wages. However, investors remain skeptical, with ongoing market volatility reflecting broader concerns.
6. What should investors watch for next?
Investors are keeping an eye on several key factors, including the upcoming inflation report, interest rate decisions from the Federal Reserve, and potential government measures to stabilize the economy. A further retreat in investor confidence could push markets even lower. As Dan Coatsworth, an investment analyst at AJ Bell, said: “Many people have been worried about elevated valuations among US equities for some time and looking for the catalyst for a market correction.”
With market volatility continuing, investors should stay informed and consider diversification strategies to manage risk.
(With inputs from agencies)