Major Stock Indexes Plunge Amid Fears of Economic Downturn
Major stock indexes experienced a sharp decline on Monday, extending a sell-off that began last week as investor confidence waned. The S&P 500, the broadest measure of U.S. stocks, dropped as much as 2.1%, erasing all gains made since President Donald Trump’s election and hitting its lowest level since September. The tech-heavy Nasdaq Composite fell even more sharply, plunging 3.4% and deepening its slide into "correction" territory, where losses exceed 10% from recent highs. The Dow Jones Industrial Average also suffered, shedding nearly 500 points, or 1.2%, as fears of a potential recession intensified.
Recession Worries Intensify as Trump Avoids Commitment
Recession fears grew over the weekend after President Trump declined to rule out the possibility of an economic downturn. In a Sunday interview with Fox News, Trump described the economy as going through “a period of transition,” a vague response that did little to reassure investors. This ambiguity, combined with persistent inflation and a shaky job market, has left markets on edge. Few major companies were spared from the Monday sell-off, with tech giants like Nvidia, Apple, Microsoft, and Tesla bearing the brunt of the losses. Nvidia, a leader in the AI-driven rally of recent years, fell over 4%, while Tesla plummeted more than 10%, wiping out all its post-election gains.
Tech and Crypto Sectors Feel the Pain
The tech sector, which had been a driving force behind market gains, was particularly hard hit. Nvidia, a standout performer in the AI boom, saw its stock drop more than 4%, bringing its year-to-date losses to 22%. Tesla, meanwhile, faced additional headwinds beyond its flagging sales in Europe and China, its most critical market. Protests against CEO Elon Musk, who has become a prominent figure in Trump’s administration, have further weighed on the company’s valuation. Even before these protests, Tesla’s struggles in key markets were already taking a toll.
The cryptocurrency market also felt the pressure, with bitcoin prices falling below $30,000 for the first time since Trump’s election. This decline came despite the White House hosting its first-ever crypto summit on Friday, where it announced the creation of a "strategic bitcoin reserve." However, some investors expressed disappointment with the details of the initiative. Shares of Coinbase, the largest U.S. crypto exchange, dropped 10% on Monday, erasing all post-election gains.
Investors Lose Confidence in Trump’s Economic Policy
Investors are growing increasingly concerned about the chaotic nature of Trump’s economic policy. The president has repeatedly imposed and then suspended tariffs on key trading partners, creating uncertainty in global markets. Additionally, the drastic cuts to the federal workforce implemented by Trump and Tesla CEO Elon Musk have raised fears of further instability in an already fragile job market. “We are in the throes of a manufactured correction,” said Sam Stovall, chief investment strategist at CFRA Research, in an interview with CNBC. He attributed the sell-off to the administration’s tariff policies and their potential impact on the economy.
Experts Predict a Mild Correction but Long-Term Optimism
Despite the current turmoil, Stovall believes the market is experiencing a typical pullback after reaching all-time highs under the Biden administration. “Right now we’re going through a typical pullback and probably will experience a mild correction before all is completed, which actually would be good for the resetting of the dials of this ongoing bull market,” he said. This view suggests that while the short-term outlook may be rocky, the long-term prognosis for the market remains positive. Investors, however, will likely remain on high alert as they wait to see how the Trump administration’s policies unfold and whether the economy can navigate the current challenges without sliding into a full-blown recession.
