The US stock market, which had been experiencing a strong bull run, now faces its first major challenge in the past two to three years. After reaching all-time highs, market indices have started to show signs of weakness amid concerns over trade wars following the implementation of new tariffs. The Dow saw a decline of 1.48%, the S&P 500 dropped by 1.76%, and the Nasdaq Composite experienced the largest fall at 2.64%.
A key factor behind this downturn appears to be growing fears about economic slowdown. If US economic growth begins to falter, it could have long-term consequences, especially given the already high market valuations. The uncertainty surrounding the impact of trade policies has been a significant concern, and the latest developments seem to have intensified investor anxiety.
The introduction of tariffs has been a major source of turbulence. The latest measures include a 25% tariff on Canada and Mexico, with no room for negotiations, along with an additional 10% duty on Chinese goods, bringing the total to 20%. Additional tariffs on agricultural imports have also been announced, with implementation expected in early April. One of the key reasons cited for raising tariffs on Chinese imports is to address concerns over fentanyl entering the US, with claims that Beijing has not done enough to prevent illegal drug flow. In response, both China and Canada have introduced their own tariffs on US imports. China has further escalated the situation by placing multiple American companies on its untrustworthy entities list and restricting exports to 15 US firms, with these measures set to take effect soon.
The release of weaker-than-expected manufacturing data added to the pressure. The latest figures from the Institute for Supply Management showed a decline in the manufacturing PMI, falling from 50.9 in January to 50.3. While still in expansion territory, the trend is concerning. Additionally, the input prices index has surged to its highest level since mid-2022, with longer delivery times for materials suggesting that tariffs may be pushing up inflationary pressures. Inflation remains around 3%, and new data signals a potential slowdown in economic activity. This places the Federal Reserve in a difficult position—raising rates could hurt growth, but keeping them unchanged while inflation remains persistent could limit future economic expansion.
Further fueling concerns, the latest projections from the Atlanta Fed indicate that GDP may contract by 2.8% in the first quarter. This is nearly double the previous estimate of a 1.5% decline from last week and marks a sharp reversal from earlier predictions of economic growth. Just weeks ago, the forecast had been significantly more optimistic, estimating a 3.9% increase in GDP.
The bond market has also reflected growing uncertainty. The yield on the 10-year US Treasury note declined by nearly 5 basis points to 4.18%, marking the largest weekly decline since late last year. A falling yield often signals expectations of economic weakness, with investors anticipating potential rate cuts. However, given inflation’s resilience, it remains unclear whether the Federal Reserve will take action to lower rates, adding to the mixed signals in the economy.
Another significant factor behind the market downturn has been the sharp sell-off in major technology stocks. Nvidia, one of the most closely watched tech companies, saw an 8.7% decline in its stock price. Tesla, Microsoft, Amazon, and Broadcom also experienced notable losses, falling 2.8%, 2.1%, 3.4%, and 6.1%, respectively. Nvidia’s most recent earnings report has led to questions about the sustainability of the AI-driven market rally, with some investors concerned about the sector’s future growth potential. The emergence of DeepSeek has also raised doubts about the strength of the AI ecosystem, with implications for some of the most high-profile investments in the market.
Following the sharp decline in stocks, US futures showed signs of stabilizing, though volatility remains a concern. Investors continue to closely monitor developments around tariffs and economic data, as uncertainty remains high.
Gold prices, meanwhile, have edged lower, driven by expectations that the Federal Reserve may keep interest rates elevated for a longer period. Trade tensions and inflation concerns, combined with a stronger US dollar, have also weighed on the bullion market. In India, gold prices currently stand at Rs 84,820 per ten grams.
