US stocks are experiencing a sharp decline on Monday as concerns about President Donald Trump ’s trade war and his criticism of the Federal Reserve prompt investors to pull back from US markets.
As of 1:50 p.m. ET4, Dow Jones Industrial Average falling 953 points (-3.15%) to 37,909.91. The Nasdaq Composite dropped 584.92 points (-3.59%), closing at 15,701.53, while the S&P 500 also saw a steep decline of 174.74 points (-3.31%), settling at 5,107.96.
The CBOE Volatility Index (VIX) spiked to 35.57, an increase of 19.97%, signaling increased investor anxiety. The surge in volatility came amid concerns over global economic risks and domestic political tensions. Despite the turmoil in the equity markets, gold continued its upward trajectory, rising 3.09% to $3,431.20 per ounce as investors sought safe-haven assets amid the broader market selloff.
The US dollar showed resilience during the session, with the EUR/USD pair climbing 0.992% to 1.15, as the currency benefited from market uncertainty. Meanwhile, oil prices remained under pressure, dropping 2.55% to $63.03 per barrel, reflecting concerns over global demand. The 10-year US Treasury yield also saw an increase of 1.664%, reaching 4.399%, indicating rising demand for government bonds as a safer investment.
More concerning, the value of the US dollar has also weakened as a retreat from US markets continues. This move is unusual, as the dollar has typically strengthened during times of market nervousness. However, this time, policies from Washington are fuelling fears and potentially eroding the dollar’s reputation as a global economic pillar and a safe investment.
Trump continued his hardliner stance on global trade over the weekend, even as economists and investors warn that his proposed tariffs could lead to a recession if not reversed. US negotiations with Japan last week have failed to reach an agreement that could lower tariffs and protect the economy, with the talks being viewed as a "test case," according to Thierry Wizman, a strategist at Macquarie.
“The golden rule of negotiating and success: He who has the gold makes the rules,” Trump posted in all capital letters on his Truth Social Network over the weekend. He added that “the businessmen who criticize tariffs are bad at business, but really bad at politics,” also in all caps.
Trump has increasingly focused on China, the world’s second-largest economy, which has escalated its rhetoric against the US China warned on Monday that other countries should not make trade deals with the US “at the expense of China’s interests,” as Japan, South Korea, and others negotiate agreements.
“If this happens, China will never accept it and will resolutely take countermeasures in a reciprocal manner,” China’s Commerce Ministry said in a statement.
Compounding market concerns are Trump’s ongoing criticisms of Federal Reserve Chair Jerome Powell. Last week, Trump again targeted Powell for not cutting interest rates sooner to give the economy a boost. The Fed has been hesitant to lower rates too quickly to avoid reigniting inflation after it has nearly reached its 2% target, down from more than 9% three years ago.
On Monday, Trump again called for action, suggesting a slowdown in the US economy unless “Mr. Too Late, a major loser, lowers interest rates.”
If Trump were to move to fire Powell, it could send shockwaves through financial markets. While lower interest rates tend to benefit stocks and other investments, the larger concern would be that a less independent Fed could struggle to control inflation in the long run. This would further undermine, if not destroy, the US reputation as the safest place in the world to hold cash.
Meanwhile, several Big Tech stocks contributed to the market decline ahead of their earnings reports later this week. Tesla, for example, dropped 6.7%. The electric vehicle maker's stock was already 50% below its record set in December due to criticism that its stock price had become too inflated and that its brand had become overly associated with Elon Musk, who is leading efforts to cut US government spending.
On the positive side, Discover Financial Services and Capital One Financial saw gains after the US government approved their proposed merger. Discover surged 3%, while Capital One rose 0.9%.
In the bond market, shorter-term Treasury yields fell as investors held onto hopes that the Fed may cut its key overnight interest rate later this year to support the economy. However, longer-term yields fluctuated as doubts about the US economy's standing in the global market mounted. The yield on the 10-year Treasury reached 4.40% in the morning, up from 4.34% at the end of last week and from about 4% earlier this month. It later retreated to 4.34%.
The US dollar also weakened against the euro, Japanese yen, Swiss franc, and other currencies.
Abroad, Tokyo’s Nikkei 225 fell 1.3%, while stocks in Seoul rose by 0.2%, and Shanghai’s index gained 0.4%.
As of 1:50 p.m. ET4, Dow Jones Industrial Average falling 953 points (-3.15%) to 37,909.91. The Nasdaq Composite dropped 584.92 points (-3.59%), closing at 15,701.53, while the S&P 500 also saw a steep decline of 174.74 points (-3.31%), settling at 5,107.96.
The CBOE Volatility Index (VIX) spiked to 35.57, an increase of 19.97%, signaling increased investor anxiety. The surge in volatility came amid concerns over global economic risks and domestic political tensions. Despite the turmoil in the equity markets, gold continued its upward trajectory, rising 3.09% to $3,431.20 per ounce as investors sought safe-haven assets amid the broader market selloff.
The US dollar showed resilience during the session, with the EUR/USD pair climbing 0.992% to 1.15, as the currency benefited from market uncertainty. Meanwhile, oil prices remained under pressure, dropping 2.55% to $63.03 per barrel, reflecting concerns over global demand. The 10-year US Treasury yield also saw an increase of 1.664%, reaching 4.399%, indicating rising demand for government bonds as a safer investment.
More concerning, the value of the US dollar has also weakened as a retreat from US markets continues. This move is unusual, as the dollar has typically strengthened during times of market nervousness. However, this time, policies from Washington are fuelling fears and potentially eroding the dollar’s reputation as a global economic pillar and a safe investment.
Trump continued his hardliner stance on global trade over the weekend, even as economists and investors warn that his proposed tariffs could lead to a recession if not reversed. US negotiations with Japan last week have failed to reach an agreement that could lower tariffs and protect the economy, with the talks being viewed as a "test case," according to Thierry Wizman, a strategist at Macquarie.
“The golden rule of negotiating and success: He who has the gold makes the rules,” Trump posted in all capital letters on his Truth Social Network over the weekend. He added that “the businessmen who criticize tariffs are bad at business, but really bad at politics,” also in all caps.
Trump has increasingly focused on China, the world’s second-largest economy, which has escalated its rhetoric against the US China warned on Monday that other countries should not make trade deals with the US “at the expense of China’s interests,” as Japan, South Korea, and others negotiate agreements.
“If this happens, China will never accept it and will resolutely take countermeasures in a reciprocal manner,” China’s Commerce Ministry said in a statement.
Compounding market concerns are Trump’s ongoing criticisms of Federal Reserve Chair Jerome Powell. Last week, Trump again targeted Powell for not cutting interest rates sooner to give the economy a boost. The Fed has been hesitant to lower rates too quickly to avoid reigniting inflation after it has nearly reached its 2% target, down from more than 9% three years ago.
On Monday, Trump again called for action, suggesting a slowdown in the US economy unless “Mr. Too Late, a major loser, lowers interest rates.”
If Trump were to move to fire Powell, it could send shockwaves through financial markets. While lower interest rates tend to benefit stocks and other investments, the larger concern would be that a less independent Fed could struggle to control inflation in the long run. This would further undermine, if not destroy, the US reputation as the safest place in the world to hold cash.
Meanwhile, several Big Tech stocks contributed to the market decline ahead of their earnings reports later this week. Tesla, for example, dropped 6.7%. The electric vehicle maker's stock was already 50% below its record set in December due to criticism that its stock price had become too inflated and that its brand had become overly associated with Elon Musk, who is leading efforts to cut US government spending.
On the positive side, Discover Financial Services and Capital One Financial saw gains after the US government approved their proposed merger. Discover surged 3%, while Capital One rose 0.9%.
In the bond market, shorter-term Treasury yields fell as investors held onto hopes that the Fed may cut its key overnight interest rate later this year to support the economy. However, longer-term yields fluctuated as doubts about the US economy's standing in the global market mounted. The yield on the 10-year Treasury reached 4.40% in the morning, up from 4.34% at the end of last week and from about 4% earlier this month. It later retreated to 4.34%.
The US dollar also weakened against the euro, Japanese yen, Swiss franc, and other currencies.
Abroad, Tokyo’s Nikkei 225 fell 1.3%, while stocks in Seoul rose by 0.2%, and Shanghai’s index gained 0.4%.
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