Tepid economic data and levy of tariffs by the US on its top trading partners led to benchmark indices on Wall Street witnessing their biggest single-day drop of 2025 on Monday.
The S&P 500 ended 1.8% lower, turned negative for the year and marked its worst day since December last year. The Dow Jones fell 650 points but saw an 800-point drop from the highs of the day. The Nasdaq Composite also fell close to 2.7%, led by a 8% sell-off in shares of Nvidia.
For a better part of the morning session, the indices traded around the flat line but took a nosedive soon after US President Donald Trump said that the 25% levy of tariffs on Canada and Mexico will take effect on Tuesday, dashing hopes of a last-minute deal which had taken place last month.
“No room left for Mexico or for Canada,” Trump said alongside Commerce Secretary Howard Lutnick from the White House. “Reciprocal tariffs start on April 2 … but very importantly, tomorrow, tariffs, 25% on Canada and 25% on Mexico … will start,” Trump said, adding that the 10% additional tariff on China will also take effect.
Monday’s data was the latest in a slew of disappointing economic reports showing weaker housing, rising unemployment claims and a drop in personal spending. Crypto, a key proxy for risk in post-election markets, tumbled a day after surging when Trump stepped up calls for a digital-asset stockpile.
“It’s time to be nervous,” said Callie Cox at Ritholtz Wealth Management. “Not bearish, but nervous. While there isn’t enough evidence to think we’re on the cusp of a deep pullback, the economy is changing quickly. The headlines are so unrelenting that people don’t know what to do.”
The drop in US shares was in sharp contrast to Europe, where equities staged one of their strongest advances of 2025. The moves extended an international rotation trade that has held sway most of the year.
Wall Street’s so-called fear gauge — the VIX — hit the highest since December. All megacaps slipped, with Nvidia Corp. down 8.7%. Taiwan Semiconductor Manufacturing Co. plans to invest an additional $100 billion in US plants that will boost its chip output on American soil and support Trump’s goal of increasing domestic manufacturing.
Oil sank as OPEC+ will proceed with plans to revive halted production amid pressure from Trump to lower prices. The yield on 10-year Treasuries fell five basis points to 4.16%. A dollar gauge slid 0.4%. Bitcoin tumbled 9.5%.
In a backdrop of some softening economic indicators and continuing uncertainty around tariffs, a rotation out of US big tech is likely to continue, according to JPMorgan Chase & Co. strategists led by Mislav Matejka.
The strategists say the rotation out of growth and into value style should help international markets, which are more value-dominated. Still, US market will probably benefit from animal spirits and deregulation, while the US usually holds up better than other regions in risk-off periods.
Morgan Stanley strategist Michael Wilson said equities are likely to be more sensitive to economic growth than to a pullback in bond yields.
US earnings estimates don’t fully reflect potential risks from President Trump’s proposed tariffs, according to Citigroup strategists led by Scott Chronert wrote.
(With Inputs From Agencies.)