Investors flee as Trump’s tariff policies push S&P 500 toward bear market

Investors flee as Trump’s tariff policies push S&P 500 toward bear market



Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., April 3, 2025. — Reuters pic

Monday, 07 Apr 2025 8:26 PM MYT

• Wall Street futures fell sharply, with the S&P 500 approaching bear market territory as concerns over US tariffs and retaliatory actions from China triggered widespread sell-offs.
• Investors flocked to government bonds, anticipating a potential interest rate cut by the Federal Reserve in response to mounting recession fears caused by the escalating trade war.
• The sharp decline in major indices, including a 10.5 per cent drop in the S&P 500, erased nearly US$5 trillion in market value, marking its largest two-day loss since March 2020.

NEW YORK, April 7 — Wall Street futures fell on Monday and the benchmark S&P 500 was set to confirm a bear market as investors piled into government bonds on worries over the ramifications of US President Donald Trump’s sweeping tariff plans.

The 10-year US Treasury yields fell to 3.986 per cent, with investors pricing in a chance of a fifth interest-rate cut from the Federal Reserve this year.

Futures, however, cut losses sharply from earlier in the session. S&P 500 E-minis were now down 120 points, or 2.35 per cent, Nasdaq 100 E-minis were down 476.5 points, or 2.72 per cent, and Dow E-minis were down 805 points, or 2.09 per cent.

“What we’re seeing is more of a technical bounce after a very steep selloff, but it’s not necessarily the end of the selloff,” said Fiona Cincotta, senior market analyst at City Index.

“For that to happen, we would need to see fundamental changes such as Trump walking back some trade tariffs or some sense that the global economy will perform okay regardless, or central banks stepping in to support economies.”

S&P 500 futures are down more than 20 per cent from their peak, suggesting the benchmark index is heading toward bear market territory. If the index ends down 20 per cent from its all-time closing highs, it would confirm the index has been in a bear market since February.

Futures linked to the Dow also fell 20 per cent from their record high.

Trump announced hefty tariffs against US trading partners last week, sparking retaliation from China and fuelling concerns that the trade war will impede economic growth and stoke inflationary pressures.

In the two sessions after Trump’s tariff decision, the S&P 500 has tumbled 10.5 per cent, erasing nearly US$5 trillion in market value, marking its most significant two-day loss since March 2020.

Trump told reporters late on Sunday that investors must endure the consequences and that he would refrain from negotiating with China until the US trade deficit is addressed.

Futures tracking the US small-cap Russell 2000 index tumbled 3 per cent, underscoring concerns about the health of the domestic economy.

The CBOE Volatility Index, seen as Wall Street’s fear gauge, was up 3.14 points to 48.45.

Stocks fell across the board in premarket trade, with megacaps continuing to bear the brunt. Apple fell 3.6 per cent, Nvidia lost 5.1 per cent, while Amazon.com shed 2.9 per cent.

Howmet Aerospace dropped 5.2 per cent, after a report said the aircraft parts supplier may halt some shipments if they are impacted by Trump’s tariffs.

The sharp declines in the past two sessions pushed the tech-heavy Nasdaq into bear market, while the Dow Jones Industrial Average slumped more than 10 per cent from its record-closing high.

The fear of a tariff-led recession caused markets to bring into play the chances of an interest-rate cut in May, with traders seeing a 51 per cent possibility, according to data compiled by LSEG.

Goldman Sachs raised the odds of a US recession to 45 per cent from 35 per cent, the second time it has increased its forecast in a week.

Several speeches by Fed officials and a series of economic indicators, including consumer price data, are slated throughout the week, with markets keenly observing any signals of recessionary fears. — Reuters