US Stocks Plunge Amid Rising Recession Concerns Due to Tariff Uncertainty

Big Tech Stocks Suffer the Most Losses.

Key Takeaways

• Investors are selling off stocks due to growing concerns over the US economy and the impact of escalating tariffs.
• Large-cap technology stocks have suffered the heaviest losses as the high-growth sector faces significant pressure.
• Value stocks have also declined but have shown greater resilience compared to growth stocks.
• Bond yields have dropped as investors seek safer assets amid economic uncertainty.

Market Selloff Accelerates Amid Economic Concerns

US stock markets tumbled on Monday, extending their recent losing streak, as fears over a shifting economic landscape gripped investors. Rising tariff tensions, uncertainty around US trade policies, stubbornly high inflation, and recession worries have fueled a sharp selloff, particularly in the high-growth technology sector.

The Morningstar US Market Index fell as much as 3.57% in intraday trading before recovering slightly to close down 2.78%. Growth stocks were hit especially hard, with large-cap growth companies plunging 4.38%, making it one of their worst single-day declines in months. Meanwhile, value stocks weathered the storm slightly better, with large-cap value stocks declining by 1.03%.

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Tech Giants Lead Market Declines

The market downturn was led by mega-cap technology stocks, which had been the primary drivers of previous rallies. Investors dumped shares of major tech firms as the sector faced mounting pressure from rising tariffs, supply chain disruptions, and higher borrowing costs.

Among the biggest decliners:

• Nvidia (NVDA) closed down 5.2%, marking its steepest daily drop in weeks.
• Tesla (TSLA) saw a staggering 15.6% decline, wiping out over $100 billion in market value.
• Palantir (PLTR) tumbled 10.1%, reflecting broader concerns about the tech sector’s vulnerability to economic uncertainty.
• The Nasdaq Composite, which is heavily weighted toward tech stocks, slumped 3.9%, extending its losses for the month to nearly 10%.

Bond Yields Fall as Investors Seek Safety

As risk assets plunged, investors sought refuge in US Treasuries, pushing bond yields lower. The yield on the 10-year US Treasury note dropped to 4.22%, continuing its downward trend from last week's 4.35%. Lower yields indicate that investors are bracing for slower economic growth and potential interest rate cuts in response to deteriorating market conditions.

Tariff Uncertainty Amplifies Recession Risks

Over the weekend, President Donald Trump signaled the possibility of more economic turbulence ahead. In a televised interview, he referred to the current environment as a "period of transition," acknowledging the risk of economic contraction as his tariff policies take effect.

Market volatility has been exacerbated by the US’s latest trade moves. New 25% tariffs on select imports from Canada and Mexico have added to investor anxiety, further straining supply chains and increasing costs for businesses. The White House has also hinted at potential tariff hikes of up to 60% on Chinese imports, which, if enacted, could severely impact US economic growth.

The US Market Index has declined 4.2% over the past week, with large-cap growth stocks down nearly 8% over the same period. Analysts warn that an extended trade war could drag the economy into a mild recession, cutting GDP growth by 1.6% over the next two years.

The Road Ahead: What to Expect Next?

With market conditions deteriorating, investors are closely watching economic indicators and Federal Reserve policy. Inflation, which has remained stubbornly above the Fed’s 2% target, could rise further if tariffs drive up consumer prices. Some economists forecast inflation could tick up by another 1-2%, forcing the Fed to maintain higher interest rates for longer.

While the stock market remains volatile, some analysts believe that value stocks and defensive sectors such as utilities, healthcare, and consumer staples could provide relative stability during this period of uncertainty. However, with tech stocks experiencing sharp losses and economic uncertainty persisting, the outlook for US equities remains highly uncertain.

Market participants will continue to monitor developments on tariffs, inflation data, and Federal Reserve actions to gauge the next moves in an increasingly unpredictable economic landscape.

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