Highlights
Stocks plunged Monday as investors dumped equities amid rising fear of recession as President Trump renewed his backing for tariffs and would not rule out recession as a result. The Dow Jones industrial average dropped 2.1 percent, the S&P 500 lost 2.7 percent, and the Nasdaq was down fully 4.0 percent. US bond yields sank in the flight from risk, the dollar rose, and oil prices fell amid expectations of falling global demand.
Equities losses reflected widespread risk aversion resulting from Trump's trade, immigration, and federal workforce policies. Investor fears were aggravated by weekend comments from Trump and members of his cabinet that investors understood to mean recession and rising inflation were acceptable short-term disruptions in a wider economic transition, and that the administration would not back off its policies.
The market also reacted badly as China moved ahead with its retaliation against US tariffs by imposing tariffs on US agricultural goods and mineral goods while Canada implemented tariffs on agricultural and manufactured goods. Investors fear that tariffs and countermeasures will be magnified when the US proceeds with its threat of reciprocal tariffs in April, and that abrupt and unexpected changes in US trade policy will occur in the meantime.
Investors appear to be shifting out of stocks, with the most popular trades, including the Magnificent Seven, suffering the most. Among sectors, worst off were technology, communications services, consumer discretionary, financials, materials and industrials. Energy outperformed even as oil prices fell. Major stock index trendlines were broken, which points to more downside. Even as selling was heavy, observers have not seen capitulation selling.
Equities losses reflected widespread risk aversion resulting from Trump's trade, immigration, and federal workforce policies. Investor fears were aggravated by weekend comments from Trump and members of his cabinet that investors understood to mean recession and rising inflation were acceptable short-term disruptions in a wider economic transition, and that the administration would not back off its policies.
The market also reacted badly as China moved ahead with its retaliation against US tariffs by imposing tariffs on US agricultural goods and mineral goods while Canada implemented tariffs on agricultural and manufactured goods. Investors fear that tariffs and countermeasures will be magnified when the US proceeds with its threat of reciprocal tariffs in April, and that abrupt and unexpected changes in US trade policy will occur in the meantime.
Investors appear to be shifting out of stocks, with the most popular trades, including the Magnificent Seven, suffering the most. Among sectors, worst off were technology, communications services, consumer discretionary, financials, materials and industrials. Energy outperformed even as oil prices fell. Major stock index trendlines were broken, which points to more downside. Even as selling was heavy, observers have not seen capitulation selling.
Definition
Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.
Description
Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.
