U.S. stocks experienced a notable downturn Monday,fueled by investor anxieties surrounding President Donald Trump’s trade policies and his ongoing criticism of the Federal Reserve. This confluence of factors has prompted a retreat from U.S. markets, impacting major indices and the dollar’s value.

Market Overview

• The S&P 500 plummeted by 2.8%, placing it more than 16% below its record high set two months prior.
• The Dow Jones Industrial Average dropped 1,062 points,or 2.7%, as of 11:45 a.m.Eastern time.
• Technology stocks, including Tesla, experienced sharp declines, dragging the Nasdaq composite down by 3.2%.

Dollar Decline: A Sign of Deeper Concerns?

Adding to the market’s woes, the U.S. dollar’s value also decreased,signaling a broader pullback from U.S. assets. This is particularly noteworthy as the dollar typically strengthens during periods of market uncertainty. However, this time around, it’s policies directly from Washington that are causing the fear and possibly weakening the dollar’s reputation as a pillar of the global economy.

Trade War Tensions Escalate

President Trump’s continued assertive stance on global trade has heightened concerns among economists and investors. They warn that his proposed tariffs coudl trigger a recession if not reversed.Recent trade discussions with Japan have not yielded a deal to alleviate tariffs and safeguard the economy. According to Thierry Wizman,a strategist at Macquarie,these talks are viewed as a test case.

Trump addressed the situation on his Truth Social Network, stating in all capitalized letters: The golden rule of negotiating and success: He who has the gold makes the rules. He also criticized those who oppose tariffs, saying that the businessmen who criticize tariffs are bad at business, but really bad at politics.

China’s response

Tensions between the U.S. and China, the world’s two largest economies, continue to escalate. China has cautioned other nations against entering into trade agreements with the U.S. that could harm its interests. The Commerce Ministry of China issued a statement asserting that If this happens, China will never accept it and will resolutely take countermeasures in a reciprocal manner.

Fed Under Fire

President Trump has also intensified his criticism of Federal Reserve Chair Jerome Powell, faulting him for not implementing interest rate cuts sooner. The Fed has resisted rapid rate reductions to prevent a resurgence of inflation, which has nearly reached its 2% target after peaking at over 9% three years ago.

Trump reiterated his concerns about a potential economic slowdown, stating that it could occur unless Mr. Too Late, a major loser, lowers interest rates.

The Stakes of Fed Independence

Any move to dismiss Powell would likely destabilize financial markets. While lower interest rates are generally favored by investors, the primary concern is that a less self-reliant Fed could struggle to manage inflation effectively. This could damage the United States’ reputation as a safe haven for capital.

Tech Stocks Lead the Decline

Several major technology stocks contributed to the market’s downward trend, particularly ahead of their upcoming earnings reports.

• Tesla shares fell by 7%, reflecting concerns about its valuation and its association with Elon Musk.
• Nvidia’s stock dropped by 5.6% due to new U.S. export restrictions on chips to China, potentially impacting its first-quarter results by $5.5 billion.
• Other tech giants, including Apple (down 3.5%), Microsoft (down 2.5%), and Amazon (down 3.6%), also experienced significant declines.

Winners and losers

The widespread sell-off saw 97% of stocks within the S&P 500 declining. One notable exception was discover Financial Services, which rose after the U.S. government approved its merger with Capital One Financial. Discover increased by 1.7%, while Capital One decreased by 0.3%.

Gold also gained value, reinforcing its status as a safe-haven asset.

Bond Market Reactions

Shorter-term Treasury yields decreased as investors maintained hopes for a Fed rate cut later in the year. Longer-term yields fluctuated amid growing doubts about the U.S. economy due to Trump’s policies. The yield on the 10-year Treasury initially rose to over 4.40% before settling back to 4.36%.

Global Market Performance

The U.S. dollar’s value declined against major currencies, including the euro, Japanese yen, and Swiss franc. In international markets, Tokyo’s Nikkei 225 fell by 1.3%, while seoul and Shanghai saw gains of 0.2% and 0.4%, respectively.