MW S&P 500 gets closer to correction territory Tuesday as investors grapple with Trump tariff fears

By Christine Idzelis

'I don't think the goal of the administration is to drive the economy into recession,' says Morgan Stanley's Andrew Slimmon of President Donald Trump's tariffs

The U.S. stock market is struggling with soured sentiment over President Donald Trump's tariffs, with the S&P 500 attempting to rebound from a big slump that left it near correction territory.

Investors in the stock market seem to be "listening to the very dark side of tariffs," said Andrew Slimmon, a senior portfolio manager for U.S. equities at Morgan Stanley Investment Management, in a phone interview. "I'm just not as convinced that it's going to be as inflationary or it's going to kill the economy."

The S&P 500 SPX was down 0.5% on Tuesday afternoon at around 5,588, paring deeper losses seen earlier in the trading session, according to FactSet data, at last check. With a correction defined as a 10% drop from a recent peak, the S&P 500 would reach such territory should it slide to 5,529.74, according to Dow Jones Market Data.

Volatility in the U.S. stock market has been rising in recent weeks as investors digest a series of new and looming tariffs imposed or threatened by the White House. Many investors are anxious that tariffs risk deepening trade wars that would hurt the U.S. economy and increase inflation.

President Trump said Tuesday on his Truth Social platform $(DJT)$ that the U.S. will add an additional 25% on all steel and aluminum coming into the U.S. from Canada, increasing the total tariff on those imports to 50%. The additional tariffs, which are "based on Ontario, Canada, placing a 25% Tariff on 'Electricity' coming into the United States," will take effect Wednesday, he said.

"There is no question that there is uncertainty," said Slimmon, adding: "I don't think the goal of the [Trump] administration is to drive the economy into recession."

Read: Stocks sell off on growth scare, yet companies' talk of recession is lowest since 2018

Meanwhile, the stock market is bracing for reciprocal tariffs that President Trump has indicated will take effect on April 2. Slimmon said it may be hard for U.S. stocks to "rally heavily" ahead of that date, noting "the mood cycle has shifted very negative" in the market on tariff worries.

Still, the broad selloff in the U.S. stock market has created some "good" buying opportunities, according to Slimmon.

"When the stock market is reacting to Washington, D.C. in a negative way, that's when you have to focus on fundamentals," he said. "I think the market is going to be higher this year, but I wouldn't be surprised if it's a single-digit return."

U.S. stocks are stumbling this year after the S&P 500 index soared 23.3% in 2024 and jumped 24.2% in 2023, according to FactSet data. The index is down around 5% so far in 2025 based on Tuesday afternoon trading.

Tom Essaye, the founder of the Sevens Report, said in a note Tuesday that "if fears of a policy-inspired growth slowdown don't occur, then this market is now in a 'fair value' range that could invite nibbling on the long side, if you can withstand the volatility."

A gauge of investor anxiety in the U.S. stock market, the Cboe Volatility Index VIX, has climbed around 52% so far this year to trade at 26.37, according to FactSet data, at last check.

When stocks see sharp swings around an expected single-digit return in 2025 for the S&P 500, that amounts to "a lot of volatility," Slimmon said.

The more "speculative" stocks have been "absolutely crushed" in the recent slump, with momentum equities being especially hit, he added.

Some of the stocks that Slimmon said he likes include major Wall Street banks that are in "fundamentally good shape" as well as some Big Tech companies that were "hit hard" in the recent selloff. "Some of the semiconductor stocks are more intriguing today than they were three weeks ago," he noted.

Most Big Tech stocks have been battered this year, with artificial-intelligence chip maker Nvidia Corp. $(NVDA)$ down more than 17% year to date as of Tuesday afternoon. Shares of the iShares Semiconductor ETF SOXX, an exchange-traded fund that tracks an index of U.S.-listed stocks in the semiconductor sector, have dropped around 10% so far in 2025 based on afternoon trading.

And the Roundhill Magnificent Seven ETF MAGS - which holds seven Big Tech stocks including Nvidia, Apple Inc. $(AAPL)$, Microsoft Corp. $(MSFT)$, Google parent Alphabet Inc. $(GOOGL)$ $(GOOG)$, Amazon.com Inc. $(AMZN)$, Tesla Inc. $(TSLA)$ and Facebook parent Meta Platforms Inc. $(META)$ - has plunged 14% year to date, according to FactSet data, at last check.

Amid worries over slowing growth, traders in the federal-funds futures market are pricing potentially three interest-rate cuts by the Federal Reserve by the end of the year, according to the CME FedWatch Tool, at last check on Tuesday. Slimmon said that he is not expecting a U.S. recession this year and the Fed may act as "counterbalance" to investors' "perceptions of what the [Trump administration's] fiscal policies" may do to the U.S. economy.

Still, Monday's selloff seemed to have rattled investors.

The S&P 500's big 2.7% drop on Monday was "not a full-throated sell signal, but it does say we shouldn't just shrug and chalk it up to normal market volatility," said Nicholas Colas, co-founder of DataTrek Research, in a note emailed Tuesday.

-Christine Idzelis

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March 11, 2025 15:59 ET (19:59 GMT)

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