US stocks plunge as Trump's sweeping tariffs fuel recession fears

Apple fell 8%, impacted by an aggregate 54% tariff on China, where much of its manufacturing is based. Microsoft declined 3%, while Nvidia slid 5.6%.

At 9:40 a.m. ET, the S&P 500 was down 3.1%, the Nasdaq Composite dropped 4.27%, and the Dow Jones Industrial Average lost 2.6%, bringing both the S&P 500 and Nasdaq to a seven-month low.

Global stocks also saw sharp declines, while government bonds surged and gold hit a record high as investors sought safe-haven assets following Trump's imposition of a 10% tariff on most US imports, along with significantly higher levies on several countries.

"This was the first bullet thrown in this trade war, and it could get nasty, and that is spooking investors," said Elias Haddad, senior markets strategist at Brown Brothers Harriman, according to the Reuters report.

"We're going to continue to trade on a heavy tone because of the heightened risk of either recession or stagflation." He added that a market correction could bottom out once clear signs emerge that the economy is not sliding into a recession.

The CBOE Volatility Index (VIX), widely regarded as Wall Street’s fear gauge, spiked to a three-week high of 26.91 points, according to the report.

The sweeping tariffs, which threaten to disrupt global trade and unsettle businesses, mark a stark contrast to the market optimism just months ago, when Trump’s pro-business policies propelled US stocks to record highs.

The S&P 500 and Nasdaq have now fallen 10% from their record highs last month, officially entering correction territory as investors weigh the economic damage from the tariffs.

Traders are increasingly betting on the Federal Reserve cutting interest rates at least three times this year, with growing speculation of a potential fourth cut by year-end.

This puts added focus on Friday’s payroll data and Fed Chair Jerome Powell’s speech, both of which could provide crucial insights into the economic outlook and monetary policy direction.

Economic data released on Thursday showed that new unemployment claims declined last week, pointing to continued labour market stability, though analysts warn that tariffs could bring increased volatility.

"The prospect of looser monetary policy and potentially greater fiscal stimulus once the Trump administration announces the tax cut plan should provide some support to equity markets," Haddad noted, according to the report.

Retail stocks took a major hit, with Nike falling 11% and Ralph Lauren dropping 12%, after Trump imposed tariffs on key production hubs, including Vietnam, Indonesia, and China.

Major US banks also suffered losses amid economic concerns, with Citigroup and Bank of America plunging over 8% each, and JPMorgan Chase & Co sliding 4.5%.

The Russell 2000 index, which tracks small-cap stocks, dropped 4%, reflecting concerns about the health of the domestic economy.

Energy stocks declined, with Exxon Mobil and Chevron falling about 3.5% each, as crude oil prices sank 6% following Trump’s tariffs and OPEC+ accelerating production hikes.

Market breadth was overwhelmingly negative, with declining stocks outnumbering advancers by a 5.33-to-1 ratio on the NYSE and 5.79-to-1 on the Nasdaq.

The S&P 500 recorded 28 new 52-week highs and 50 new lows, while the Nasdaq Composite saw 13 new highs and 316 new lows.