U.S. stocks took a sharp hit on Monday as mounting concerns over tariffs, a potential government shutdown, and economic slowdown triggered a broad market selloff. The S&P 500 dropped 2.7%, marking its worst one-day decline since December, while the Nasdaq plunged 4%, its biggest single-day loss since September 2022. Investors pulled back as uncertainty over trade policies and economic risks grew.
Tech stocks lead the declines
Technology stocks were hit the hardest, with the tech-heavy Nasdaq entering correction territory, down more than 10% from its December highs. The “Magnificent 7” tech giants, which have led much of the market’s gains, saw steep losses, driven in part by rising Japanese bond yields that led to the unwinding of yen carry trades. Tesla fell 15.4%, its worst day since 2020, while Coinbase and MicroStrategy plunged 17.6% and 16.7%, tracking Bitcoin’s weakness.
Trade and political uncertainty weigh on markets
Market anxiety is being fueled by ongoing trade disputes, with China’s retaliatory tariffs taking effect, while new U.S. tariffs on base metals are set to be introduced later this week. At the same time, lawmakers in Washington are struggling to pass a spending bill to prevent a government shutdown, adding another layer of uncertainty. HSBC has downgraded U.S. stocks, citing the unpredictability of trade policies as a major risk factor.
What’s next for investors?
The CBOE Volatility Index (VIX), often referred to as the “fear index,” surged to its highest level since August 2024, signaling increased market turbulence. With the S&P 500 now 8.6% below its all-time high, traders are closely watching for signs of stabilization or further downside. As uncertainty around tariffs, interest rates, and economic growth continues, market volatility is likely to remain high in the coming weeks.
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