(Bloomberg) — More tepid economic news and a pledge by Donald Trump to push through tariffs on top trading partners stressed Wall Street risk tolerances anew, sending bonds up and stocks to their biggest loss of the year.
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The S&P 500 lost nearly 2% as the US president said Mexico and Canada would be unable to negotiate a reprieve from tariffs set to take effect Tuesday. The loonie and the peso slipped. The White House later said Trump also signed an order doubling a tariff on China to 20%. A plunge in big tech weighed heavily on equities, which were also hit by weak manufacturing data.
Stocks erased their Friday runup to push the S&P 500 almost 5% below a record high from Feb. 19. The gauge has alternated between gains and losses of at least 1.5% for three sessions, a stretch of violent reversals not seen since March 2020.
Monday’s data was the latest in a slew of disappointing economic reports showing weaker housing, rising unemployment claims and a drop in personal spending. Crypto, a key proxy for risk in post-election markets, tumbled a day after surging when Trump stepped up calls for a digital-asset stockpile.
“It’s time to be nervous,” said Callie Cox at Ritholtz Wealth Management. “Not bearish, but nervous. While there isn’t enough evidence to think we’re on the cusp of a deep pullback, the economy is changing quickly. The headlines are so unrelenting that people don’t know what to do.”
The S&P 500 fell 1.8%. The Nasdaq 100 slid 2.2%. The Dow Jones Industrial Average dropped 1.5%. A gauge of the Magnificent Seven shares sank 3.1%. The Russell 2000 lost 2.8%. A UBS basket of US stocks negatively impacted by tariffs slipped 2.9%.
The drop in US shares was in sharp contrast to Europe, where equities staged one of their strongest advances of 2025. The moves extended an international rotation trade that has held sway most of the year.
Wall Street’s so-called fear gauge — the VIX — hit the highest since December. All megacaps slipped, with Nvidia Corp. down 8.7%. Taiwan Semiconductor Manufacturing Co. plans to invest an additional $100 billion in US plants that will boost its chip output on American soil and support Trump’s goal of increasing domestic manufacturing.
Oil sank as OPEC+ will proceed with plans to revive halted production amid pressure from Trump to lower prices. The yield on 10-year Treasuries fell five basis points to 4.16%. A dollar gauge slid 0.4%. Bitcoin tumbled 9.5%.
To David Kostin at Goldman Sachs Group Inc., any S&P 500 recovery attempt is likely to prove temporary amid economic worries.
Investor exposure declined last week, but it isn’t low enough yet to suggest “tactical upside as a result of of depressed positioning,” he said. “An improvement in the US economic growth outlook will be required to fully reverse the recent equity-market weakness.
“Markets have been expressing growing concerns about a potential slowdown in the US,” said Florian Ielpo at Lombard Odier Investment Managers. “The message of caution needs to be heard, and depending on Friday’s payroll, this deteriorating macro momentum could cap markets’ progression.”
Goldman Sachs’ Scott Rubner says he lacks conviction that demand for US stocks is high enough to sustain a rebound.
The tactical flow specialist turned bearish last month amid fading inflows from retail and other supportive buyers. He notes that while the market is in the final stages of a clearing event for positioning, he’s “not ready” to sound an all-clear yet. Instead, he recommends investors be “nimble on highest conviction quality themes.”
In a note to clients, Rubner said March 14 “sticks out” to him as a potential low in stocks, with history suggesting that the first half of the month “typically chops around.”
In a backdrop of some softening economic indicators and continuing uncertainty around tariffs, a rotation out of US big tech is likely to continue, according to JPMorgan Chase & Co. strategists led by Mislav Matejka.
The strategists say the rotation out of growth and into value style should help international markets, which are more value-dominated. Still, US market will probably benefit from animal spirits and deregulation, while the US usually holds up better than other regions in risk-off periods.
Morgan Stanley strategist Michael Wilson said equities are likely to be more sensitive to economic growth than to a pullback in bond yields.
US earnings estimates don’t fully reflect potential risks from President Trump’s proposed tariffs, according to Citigroup strategists led by Scott Chronert wrote.
Still, the outlook is more optimistic when viewed at the single-stock and sector level, they say.
“A high-level emphasis on index earnings and related valuations can be misleading. As we head further into ’25, the moniker that it’s a market of stocks not a stock market may take on growing importance, particularly as Trump policy impacts become clearer,” they said.
Equity markets around the world are trouncing US stocks in early 2025, an ominous historical signal for how the rest of the year could shape up for US investors.
If history’s a guide, that could mean further relative weakness for US stocks in the months ahead. The S&P 500 has never outperformed global peers on an annual basis when it has trailed the international benchmark by more than 2.8 percentage points by mid-February, as it did this year, according to a Bloomberg Intelligence analysis studying 35 years of data.
The underperformance is “a rare and historically significant red flag against a full-year recovery as the market’s fundamentals deteriorate,” according to BI strategists Gina Martin Adams and Gillian Wolff, who conducted the analysis.
Corporate Highlights:
Sunnova Energy International Inc. plunged as the company warned there’s substantial doubt it will remain in business.
Kroger Co. replaced Chief Executive Officer Rodney McMullen following an investigation into his personal conduct, casting a shadow on the supermarket operator’s path forward following a failed deal and a string of management departures under the longtime leader.
AbbVie Inc. agreed to pay as much as $2.2 billion for a next-generation obesity drug from Danish biotech Gubra A/S, marking its entry into the hyper-competitive weight-loss market.
Tether Holdings SA, issuer of the biggest stablecoin cryptocurrency, said its longtime chief financial officer and controlling shareholder Giancarlo Devasini will transition into a new role as chairman of the firm.
Philip Morris International Inc. is exploring a potential sale of its cigar business in the US, people familiar with the matter said, as the tobacco maker continues its shift toward smoke-free products.
Allegro Microsystems Inc. is drawing takeover interest from larger competitor ON Semiconductor Corp., according to people familiar with the matter.
Key events this week:
Eurozone unemployment, Tuesday
President Donald Trump’s speech to a joint session of Congress, Tuesday
China Caixin services PMI, Wednesday
Eurozone HCOB services PMI, PPI, Wednesday
US ADP employment, ISM services index, factory orders, Wednesday
