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The Dow Jones Industrial Average dropped 491 points, or 1.2%, while the S&P 500 shed 2.1% and the tech-heavy Nasdaq plummeted 3.4%. This sharp decline follows a painful previous week when the S&P 500 lost 3.1%, the Dow fell 2.4%, and the Nasdaq shed 3.5%.
"We are in the throes of a manufactured correction," said Sam Stovall, chief investment strategist at CFRA Research. "It's really based in response to the new administration's tariff programs, or at least threats of tariffs, and what kind of an impact that will have on the economy."
The "Magnificent Seven" tech giants bore the brunt of Monday's selloff. Tesla shares plunged 8%, while Alphabet dropped 4%, and both Meta and Nvidia fell 5%, reflecting growing anxiety about how these companies might fare in an economic downturn.
Investor nerves were further rattled after Trump's Sunday Fox News interview where he described the economy as going through "a period of transition" when questioned about recession possibilities. This vague acknowledgment has heightened market uncertainty about the administration's economic strategy.
The CBOE Volatility Index (VIX) – Wall Street's "fear gauge" – surged more than 10% to 25.93 on Monday, reaching its highest level since December 2024, signaling heightened investor anxiety.
Goldman Sachs responded by downgrading its 2025 economic growth forecast from 2.4% to 1.7%. "We now see the average U.S. tariff rate rising by 10 percentage points this year, twice our previous forecast and about five times the increase seen in the first Trump administration," wrote Jan Hatzius, Goldman's chief economist.
Consumer sentiment is also showing signs of strain. A New York Federal Reserve survey revealed the perceived likelihood of missing minimum debt payments rose to 14.6%, the highest since April 2020. Additionally, 27.4% of households now expect a worse financial situation in the coming year – the highest percentage since November 2023.
Market attention now turns to this week's inflation data, with February's Consumer Price Index due Wednesday followed by Producer Price Index figures on Thursday. "What actually could be encouraging to investors is that the Street and our economists are forecasting more favorable readings in both headline and core CPI," noted Stovall.
As the market approaches oversold territory, investors remain divided on whether any positive economic news might trigger a meaningful recovery or merely a temporary bounce before further declines. With the S&P 500 and Nasdaq down 6% and 9% respectively over the past month, Wall Street continues to navigate a precarious path through this administration-driven market correction.
