Equity investors are experiencing significant losses in 2025, with the Nasdaq 100 index plunging 3.8% on Monday, erasing over $1 trillion in value. U.S. stocks had their worst trading day of the year, raising concerns about further declines and the possibility of a bear market for the Nasdaq Composite Index.
The Nasdaq Composite has entered a market correction, defined as a 10% drop from a recent high. The index had reached a peak on December 16 at 20,173.89. If the decline reaches 20%, it would signify a bear market. The S&P 500 has already fallen 8.6% from its recent highs, while a group of leading technology stocks declined by 5.4% on Monday.
Major indices suffered sharp losses, with the Dow dropping 2.08%, the S&P 500 falling 2.7%, and the Nasdaq Composite declining by 4%, hitting new multi-month lows. However, Tuesday’s trading session shows signs of stabilization, with the Dow down by 250 points while the S&P 500 and Nasdaq remain largely unchanged. Some stocks are attracting dip-buyers after significant losses the previous day. Tesla, which fell over 15%, is up by 5% in pre-market trading, while Nvidia, after closing 5% lower, has gained over 1.5%.
Market sentiment is affected by concerns over recessionary pressures and economic uncertainty. The possibility of a recession has caused increased caution among investors. Tariffs introduced by former President Donald Trump are seen as a potential drag on the economy, contributing to inflation concerns and complicating the Federal Reserve’s ability to lower interest rates.
Amid these uncertainties, the yield on the benchmark 10-year Treasury note has declined from a recent peak of 4.8% to 4.216%, signaling expectations that the Federal Reserve may need to lower interest rates to support economic stability. While the broader economy remains relatively stable, consumer sentiment and the job market suggest underlying challenges. Monday’s market reaction was largely driven by concerns over recessionary risks and the Fed’s next moves.
The timing of any interest rate adjustments remains uncertain, but a potential rate cut could provide a boost to U.S. equities. Investors are also monitoring upcoming economic data, particularly the latest U.S. inflation figures, which are expected to provide further insights into price trends and market direction. Meanwhile, Citigroup Inc. strategists have adjusted their outlook, downgrading U.S. equities from overweight to neutral while upgrading their stance on Chinese markets.
