U.S. stocks plunged by the most since the depths of the pandemic, erasing $2.5 trillion in value as President Donald Trump’s drastic new trade tariffs ignited widespread recession fears and left investors seeking out safe-haven bonds as well as the yen.
The S&P 500 Index sank 4.8% — its biggest drop since June 2020 — to enter a technical correction again following a brutal global rout in markets from Tokyo to London. The Nasdaq 100 Index shed 5.4% — its worst day since September 2022 — driven by Apple’s 9% loss, while Nvidia and Tesla both plunged. Everything from sneaker makers to apparel plunged after Trump rolled out new tariffs on crucial manufacturing countries including Vietnam and Indonesia. Nike slid 14%. Lululemon Athletica, Abercrombie & Fitch and Gap also declined.
Trump on Wednesday imposed the steepest American tariffs in a century, saying he will apply a 10% tariff on all exports to the U.S., with even higher duties on some 60 nations, to counter large trade imbalances with the U.S.. Some of the worst hit stocks were the riskiest corners of the market — shares of small companies — sending a warning signal for investors. The Russell 2000 Index dropped 6.6% into what’s called a technical bear market after losing more than 20% compared with its record in late 2021.
While the selling was broad, investors culled risky stocks from their portfolios, punishing shares of fast-growing companies that have led the market higher during the past two years. Volatility has come roaring back as the Cboe Volatility Index soared to 30, its highest level so far this year. A continuation of the selloff on Friday — when the government’s jobs report for March is released — threatens to extend the S&P’s losses to six of the past seven weeks.
"This jobs report is crucial,” said Julie Biel, a portfolio manager at Kayne Anderson Rudnick. "We are much more vulnerable to a recession now, given the tariffs than just a few months ago and this will give us a glimpse into just how strong employment was ahead of the tariff rollout.”
On Friday, investors will get a look at the monthly jobs print — the first major piece of data for the quarter — which could have wide-ranging implications for bond, stock and currency markets as well as the Fed’s next moves. Chair Jerome Powell is scheduled to deliver remarks at the end of the week, which will be parsed for signs of weakness spreading to the workforce.
The derivatives market is pricing in more volatility ahead. Options traders are betting that the S&P 500 will move roughly 1.4% in either direction on Friday after the jobs print, based on the price of at-the-money straddles, according to Stuart Kaiser, Citigroup Inc.’s head of U.S. equity trading strategy.
"The scope of tariffs and how many countries were hit came as a big shock, igniting fears this is an opening shot of a long trade war to come that will rattle markets and stall the economy,” said John Cunnison, chief investment officer at Baker Boyer Bank. "Does this mean a recession is coming? Clearly, markets are signally there needs to be a reset on the outlook for growth.”
A Bloomberg gauge of the dollar dropped the most on record, oil plunged and gold eased from records. The S&P 500 is now down 12% from its record set in February. Automakers General Motors and Ford Motor both fell. Retail shares were pummeled, with Best Buy dropping 18% and Dollar Tree sliding 13%.
Bond traders have boosted bets on interest-rate cuts from the Federal Reserve on fears that the trade war will backfire on the U.S. economy, sending the yield on benchmark 10-year Treasury notes briefly below 4% for the first time since October. Credit rating firm Fitch warned that tariffs were a "game-changer” for the global economy, with the tariffs altogether threatening to knock down U.S. economic growth by 2 percentage points this year and raise inflation close to 5%, according to UBS.
With Trump’s trade war now in full effect, investors and analysts are on edge waiting for a barrage of corporate profit warnings that could jolt the stock market. Analysts have lowered their outlook for the S&P 500’s 2025 performance since the start of the year. They see S&P 500 companies growing profits by 9.5% this year, down from nearly 13% in early January, according to data compiled by Bloomberg Intelligence.
RH, a luxury home furnishing company, sank 40% for the biggest drop on record after its annual revenue growth forecast trailed Wall Street expectations. Analysts said the new round of tariffs adds "significantly more uncertainty.”
Adding to signs of a slowing workforce, U.S. service providers in March expanded at the slowest pace in nine months while recurring applications for unemployment benefits rose to the highest since November 2021.
"Oh boy, now what? What are other countries going to do? We still have to see what the retaliatory measures from other countries will be,” said Thomas Martin, senior portfolio manager at Globalt Investments. "Clearly the stock market is signally this will have a detrimental impact to economic and earnings growth.”
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