U.S. stocks had a wild day on Monday after President Donald Trump threatened to increase his tariffs, even though a strong show from Wall Street revealed how badly they want him to do the opposite.
The S&P 500 dropped by 0.2% after a day filled with sudden ups and downs as the markets tried to understand what Trump wants from his trade war. If his goal is to get other countries to agree to new trade deals, he could lower his tariffs and possibly avoid a recession. But if he wants to reshape the economy and keep tariffs for a long time, stock prices may need to fall even more.
The Dow Jones Industrial Average fell 349 points, or 0.9%, while the Nasdaq composite gained 0.1%.
All three major indexes started the day with big losses, and the Dow dropped as much as 1,700 points, following even worse drops in other parts of the world. However, it suddenly bounced back with a gain of nearly 900 points late in the morning. The S&P 500 also swung from a 4.7% loss to a 3.4% gain, which would have been its biggest increase in years.
The sudden rise followed a false rumor that Trump was thinking about pausing his tariffs for 90 days, which the White House quickly dismissed as “fake news.” The fact that a rumor could affect trillions of dollars worth of investments shows how much hope investors have that Trump might ease up on tariffs.
Stocks then fell again, and soon after, Trump doubled down on his stance and said he might increase tariffs on China after the country retaliated with its own tariffs on U.S. products.
This was a big blow to Wall Street because it suggested Trump might not care how much damage his policies do to the market. Many investors thought a president who had boasted about stock market gains under his watch would scale back policies if they caused the Dow to drop.
On Sunday, Trump told reporters on Air Force One that he wasn’t worried about the market decline and that “sometimes you have to take medicine to fix something.”
Donald Trump walks down the stairs of Air Force OneTrump has given several reasons for his high tariffs, including bringing manufacturing jobs back to the U.S., a process that could take years. He also said he wanted to reduce the U.S.’s trade deficit by lowering the amount of goods the country imports compared to what it exports.
Despite his latest tariff threat, stocks kept swinging between gains and losses, partly because there’s still hope in the markets that negotiations may happen soon.
“We’re not calling the all-clear at all, but when you have this type of volatility in the market, of course, you’re going to have back and forth,” said Nate Thooft, a senior portfolio manager at Manulife Investment Management.
“We’re all waiting for the next bit of information,” he added. “Literally a Truth Social tweet or an announcement of some sort about real negotiations could dramatically move this market. This is the world we live in right now.”
What seemed clear on Monday was the financial pain that continued to hit investments worldwide for a third day after Trump’s “Liberation Day” tariff announcement.
Stocks in Hong Kong fell by 13.2%, marking their worst day since 1997. A barrel of U.S. crude oil dropped below $60 for the first time since 2021, partly due to fears that a weaker global economy from trade restrictions will reduce fuel demand. Bitcoin also dropped below $79,000, down from its record high of over $100,000 set in January, after staying steadier than other markets last week.
Trump’s tariffs challenge the trend of globalization, which has reshaped the world’s economy. Globalization has helped lower prices for products in U.S. stores but also caused jobs to move overseas.
The tariffs are also putting pressure on the Federal Reserve. Investors have become used to the Fed stepping in and lowering interest rates to protect the economy during downturns, but this time the Fed may have less room to act because inflation is still higher than the Fed wants. While lower interest rates can help the economy, they can also push inflation higher.
Wall Street signs are displayed outside the NYSE“The recent tariffs will likely increase inflation and are causing many to consider a greater probability of a recession,” said JPMorgan CEO Jamie Dimon, one of the most powerful leaders on Wall Street, in his annual letter to shareholders. “Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth.”
In the bond market, Treasury yields went up, recovering some of their big drops from earlier weeks. Some of the movement may be due to lower expectations for interest rate cuts by the Fed, and some analysts said it could be because investors from outside the U.S. are reducing their U.S. investments.
The yield on the 10-year Treasury rose to 4.20% from 4.01% late on Friday.
Earlier in the day, the S&P 500 briefly fell more than 20% below its record high from less than two months ago. If it finishes the day below this level, it would be considered a “bear market,” meaning a significant downturn that’s worse than the usual 10% drop that happens from time to time. A bear market signals a deeper, more severe decline in stock prices.
The S&P 500, which is a key index for many investors’ 401(k) accounts, has just had its worst week since the COVID-19 pandemic began affecting the global economy in March 2020.
The index finished Monday by falling 11.83 points to 5,062.25. The Dow Jones Industrial Average lost 349.26 points, closing at 37,965.60, while the Nasdaq composite added 15.48 points, reaching 15,603.26.
