US stocks experienced a significant downturn on Monday as investors prepared for President Donald Trump's proposed tariffs on Canada, Mexico, and China to take effect by midnight. The Dow Jones Industrial Average plummeted 650 points, or 1.49%, in afternoon trading, signaling a turbulent start to the week. The broader market also felt the strain, with the S&P 500 falling 1.69% and the Nasdaq Composite dropping 2.27%.
The yield on the 10-year Treasury slid to 4.18%, further indicating investor apprehension. Smaller companies tracked by the Russell 2000 index suffered a more severe hit, falling 2.25%. Significant contributors to the market's downturn included Nvidia (NVDA), which saw its shares fall by 7% during the afternoon.
Investor sentiment was heavily influenced by fear, as highlighted by CNN’s Fear and Greed Index. This fear was exacerbated when Trump posted on Truth Social, indicating plans to impose tariffs on "external products," potentially affecting agricultural goods. Uncertainty surrounding how these tariffs will be implemented has added to market volatility.
“Customers are pausing on new orders as a result of uncertainty regarding tariffs. There is no clear direction from the administration on how they will be implemented, so it’s harder to project how they will affect business,” said one survey respondent.
The lack of clarity from the administration has left many businesses and investors in a state of uncertainty. However, some experts, like Draho, remain optimistic, maintaining a "positive medium-term outlook" despite the current volatility.
In his post, Trump directed attention toward American farmers, suggesting an emphasis on domestic production.
“To the Great Farmers of the United States: Get ready to start making a lot of agricultural product to be sold INSIDE of the United States. Tariffs will go on external product on April 2nd. Have fun!” Trump stated.
While US markets faced challenges, European defense stocks soared as leaders there considered re-arming amid diminishing US support for Ukraine. Additionally, WTI crude, the US benchmark, fell 2.4% after OPEC announced increased oil production set for April.
The stock market's decline began early Monday morning as investors processed the latest manufacturing survey from the Institute for Supply Management. The survey's insights into manufacturing activities further contributed to the day's market movements.