U.S. stock markets plummeted on Monday following President Trump’s decision to impose tariffs on three major trading partners of United States. Market participants’ confidence have shaken on concerns of its effect on the country’s already elevated inflation rate and recently released several soft key economic data clearly indicating that growing weakness of the U.S. economy. Geopolitical conflicts were other headwinds. All three major stock indexes ended in negative territory after a choppy session.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) tumbled 1.5% or 649.67 points to close at 43,191.24. At intraday high, the blue-chip index was up nearly 193 points. Notably, 23 components of the 30-stock index ended in positive territory and 7 ended in negative zone. 

The tech-heavy Nasdaq Composite finished at 18,350.19, plunging 2.6% or 497.09 points due to pathetic performance by technology bigwigs. In intraday trading, the tech-laden index was up 145 points. The major loser of the index was NVIDIA Corp. NVDA. The stock price of the global leader in generative artificial intelligence chips space depreciated 8.7%. NVIDIA currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The S&P 500 plummeted 1.8% or 104.78 points to finish at 5,849.72. In intraday trading, Wall Street’s most observed benchmark was up 31.6 points. Seven out of 11 broad sectors of the broad-market index ended in negative territory, while four in positive territory. 

The Energy Select Sector SPDR (XLE), the Technology Select Sector SPDR (XLK), the Materials Select Sector SPDR (XLB), the Communication Services (XLC), the Industrials Select Sector SPDR (XLI) and the Consumer Discretionary Select Sector SPDR (XLY) tanked 3.5%, 3%, 2%, 1%, 1.4% and 1.8%, respectively. 

The fear-gauge CBOE Volatility Index (VIX) was up 16.1% to 22.78.  At intraday trading, the fear-gauge index touched 24.31, its highest since Dec. 20. A total of 18.5 billion shares were traded on Monday, higher than the last 20-session average of 15.7 billion. The S&P 500 posted 57 new 52-week highs and 27 new lows while the Nasdaq recorded 58 new 52-week highs and 453 new lows.

Wall Street Tumbles on Trump Tariffs

U.S. stock markets closed sharply lower in the second half of trading following President Donald Trump’s assertion that the United States will impose 25% tariffs on imports from Canada and Mexico and an additional 10% tariff on imports from China on Mar.4. 

Investors are highly concerned regarding the impact of Trump’s tariffs on the U.S. economy. Inflation rate is still much higher than the targeted 2% level of the Fed. Tariffs will raise the cost of inputs and thereby inflation rate. Personal spending – the largest component of the U.S. economy – fell unexpectedly in January. 

Moreover, retail sales and building construction dwindled last month. Both the consumer sentiment and consumer confidence indexes failed to meet expectations in January. Manufacturing PMI for January and construction spending for December also came below expectations. 

U.S. Stops Aids to Ukraine

A White House official confirmed that U.S. President Donald Trump has paused all military aid to Ukraine following his clash with Ukrainian President Volodymyr Zelenskiy last week. The two-supremo engaged in verbal spats before world’s media. 

Zelenskiy left the White House without signing a much-hyped agreement between the two countries regarding the joint development of natural resources. Ukraine is an important ally of the United States. Investors were concerned about the future of the prolonged geopolitical conflicts between Ukraine and Russia.

Economic Data

The Institute of Supply Management (ISM) reported that manufacturing PMI (purchasing managers’ index) for February came in at 50.3 missing the Zacks consensus estimate of 51.1 and lagging previous month’s metric of 50.9. Any reading above 50 indicates expansion of manufacturing activities.

However, the new orders Index dropped back into contraction territory after expanding for three consecutive months, registering 48.6 in January compared with 55.1 recorded in January. The employment Index came in at 47.6 compared with 50.3 in January. The price Index surged to 62.4 in February compared with 54.9 in January. 

Construction Spending in January fell 0.2% compared with 0.5% increase in December. The Zacks Consensus Estimate was for an increase of 0.1%.

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