On Monday, March 10, the stock indexes of the United States showed a significant drop.
The mentioned dynamic was recorded against the background of a combination of unfavorable factors, including ongoing discussions about Washington’s tightening trade policy, implemented in the form of tariffs on imported goods, and increasing concerns about the government shutdown. The specified circumstances have become a source of increasing the level of realism of the risk that a recession scenario will materialize in the space of the United States economic system.
On Monday, the steep sell-off resumed, which was already observed last week. During the session, the relevant process demonstrated what can be described as a consistent intensification. All three United States major indexes showed sharp declines.
The S&P 500 had its biggest one-day drop since December 18. This indicator showed a decrease of 2.7%.
The tech-loaded Nasdaq dropped 4%. This indicator demonstrated its biggest single-day percentage drop since September 2022. The Dow fell by 2.08%.
The S&P 500, coming off its biggest weekly drop since September, is currently 8.6% below the record closing level recorded less than a month ago.
Last week, the tech-loaded Nasdaq dropped more than 10% below its all-time closing high seen on December 19th. Since then, this indicator has been in a correction.
The Dow closed lower by 2.08%. The bellwether S&P 500 closed below its 200-day moving average.
Tom Hainlin, national investment strategist at US Bank Wealth Management in Minneapolis, said Monday’s drop in stock indexes is significant for one day. At the same time, the expert noted that in this case, it is observed the normal sort of drawdown occurs in an upmarket. Tom Hainlin also said that concerns are intensifying and investors are moving to the sidelines, but at the same time, there has not yet been a record of worrying growth sentiment reflected in the data.
Last Sunday, March 9, the President of the United States Donald Trump refused to comment on the negative market reaction to his new tariff measures against Washington’s largest trading partners. Also, in this case, no answer was given to the question of whether could concerns related to Mr. Trump’s erratic policy shifts become a factor in the implementation of a recession scenario in the space of the US economic system. The refusal to comment was given during communication with media representatives. But in this case, it is also noteworthy that Donald Trump refused to rule out the possibility that the United States economic system will face a recession in the current year. He did not go into details, in a certain sense, abstractly signaled that his vision of the future was not focused on specific options for transforming the situation, which did not provide for any other scenarios. Donald Trump has stated that his economic goals will take time and a transition period to bear fruit.
HSBC downgraded US stocks. It was noted that the reason for this decision was the uncertainty associated with the current configuration of Washington’s tariff policy.
Economists interviewed by the media noted an increased risk of a recession scenario not only in the United States but also in Mexico and Canada.
Shares of technology companies are currently under pressure from the strengthening of the yen and a sharp rise in sovereign bond yields. Investors unwind yen carry trades on expectations of an upcoming increase in borrowing costs in Japan.
The carry trades involve borrowing yen at a low cost to invest in other currencies and assets offering higher yields. This unwinding is at least a partial reason for the sell-off of technology stocks such as the Magnificent 7, a group of artificial intelligence-related megacaps.
Thomas Hayes, chairman at Great Hill Capital in New York, said that those who want to understand, what is happening in the market, should stop paying attention to tariffs and focus on Japanese government bond yields. According to the expert, the carry trade is unwinding, and all that hot money was in Mag 7. Thomas Hayes said that’s why tech is down.
In addition to the uncertainty surrounding the current configuration of Washington’s tariff policy, another pressure factor is lawmakers’ attempts to pass a spending bill to prevent a government shutdown.
Retaliatory tariffs from China on some imported goods from the United States will take effect on Monday. Duties from Washington on some base metals are expected later this week.
The CBOE Volatility Index, often called the fear index, rose to its highest closing level in more than six months.
The value of Tesla shares fell by 15.4%. This is the largest one-day decline in the mentioned indicator since September 2020. The impact on the dynamic of the securities of the electric vehicle manufacturer was that the company’s radiance as an example of a successful business dimmed in the wake of billionaire chief executive officer Elon Musk’s Department of Government Efficiency firings and protests arising from his support of far-right political parties in Europe.
Coinbase and MicroStrategy, tracking bitcoin weakness, decreased by 17.6% and 16.7% respectively.
As we have reported earlier, US Goods Trade Deficit Demonstrates Growth.
