US equity indexes plunged with government bond yields in midday trading Monday as concerns mounted that the economy is heading for a recession and a gauge measuring inflationary expectations worsened.

The Nasdaq Composite sank 4.1% to 17,445.2, the S&P 500 slumped 2.7% to 5,615.9, and the Dow Jones Industrial Average was 1.9% lower at 41,995.3. The S&P 500 and the Nasdaq fell to the lowest respective levels since mid-September.

Communication services, technology, and consumer discretionary sectors led the decliners, while Energy was among the top gainers. The so-called Magnificent-7 group of stocks such as Tesla (TSLA), Meta Platforms (META), Apple (APPL), and Nvidia (NVDA) were among the worst-performing 20 mega-cap stocks, which are firms with a market capitalization of more than $200 billion.

The CBOE's volatility index VIX, known as the fear gauge, soared 15% to 26.90 intraday.

President Donald Trump failed to rule out that the US economy could be entering a recession in 2025 while telling Fox News over the weekend that there will be a "period of transition because what we're doing is very big."

"The US administration's hint that the US may undergo a period of transition and 'detox' may be a mere fact, but is also a strategically placed message, with political undertones," Thierry Wizman, global forex and rates strategist at Macquarie, said in a note to clients Monday. "Strategic because it connotes a willingness to take the economy close to recession, which improves the administration's bargaining power with trade counterparties, the Fed, and the bond market."

Trump's comments were "political too, insofar as it signaled the need to get an economic adjustment concluded well before the mid-term elections," Wizman added.

Tariffs unsettled markets last week after he imposed a 25% levy on Mexico and Canada, sparking concern US prices would increase in response to punitive import duties. His administration later delayed some of the tariffs by a month, clouding the outlook for supply costs. Additional 10% import duties on China remained unchanged. The three countries are the US' largest trading partners.

In economic news Monday, median inflation expectations increased by 0.1 percentage point at the one-year horizon to 3.1% in February, according to the Federal Reserve Bank of New York. They were unchanged at the three-year and five-year horizons at 3%.

US Treasury yields dropped, with the 10-year diving 9.1 basis points to 4.23% and the two-year rate traded 7.7 basis points lower to 3.93%.

The US dollar depreciated 0.6% against the Japanese yen to 147.19.

West Texas Intermediate crude oil futures retreated 1.2% to $66.23 a barrel.

Gold futures fell 0.4% to $2,901.11, and their silver counterparts declined 1.1% to $32.45.