As Wall Street heads into a new quarter, a flurry of President Donald Trump’s tariffs are set to go into effect. That has traders on edge and has helped put US stocks in their worst first-quarter slump in years.
Wall Street has been rocked with volatility this year as Trump’s tariff proposals have kept investors in a cloud of uncertainty. The benchmark S&P 500 index is down 4.6% for the year, its worst start since 2022 and its worst quarter since September 2022.
US stocks were mixed Monday as traders staged an afternoon rally. The Dow closed higher by 418 points, or 1%, reversing course after opening lower. The S&P 500 gained 0.55%. The benchmark index rebounded into the green in the afternoon after sliding as much as 1.65% Monday morning, briefly reentering correction territory and dropping to its lowest level since September. The Nasdaq slid 0.14%, paring losses after sliding 2.7% in morning trading and hitting its lowest level since September.
While US stocks rebounded, stocks around the globe were lower Monday ahead of Trump’s so-called “Liberation Day” this Wednesday when reciprocal tariffs in addition to others are set to be unveiled. Economists anticipate the sweeping tariffs could spur inflation and drag on economic growth.
The full extent of Trump’s tariffs is yet to be seen, and the lack of clarity has weighed on Wall Street. Market strategists have been revising down their forecasts for US stocks amid heightened concerns about the impact of Trump’s tariffs on the US economy.
Analysts at Goldman Sachs on Sunday lowered their year-end target for the S&P 500 to 5,700 from 6,200. That comes after analysts at the bank earlier this month lowered their target to 6,200 from 6,500.
Analysts at Barclays last week lowered their year-end target for the S&P 500 to 5,900 from 6,600. Meanwhile, analysts at UBS lowered their year-end target to 6,400 from 6,600.
Ed Yardeni, president of investment advisory Yardeni Research, on Sunday lowered his year-end target for the S&P 500 to 6,100 from 6,400. Yardeni earlier this month had lowered it to 6,400 from 7,000.
The economy faces a growing risk of a recession as tariffs could hinder growth, increase unemployment and contribute to inflation, according to Goldman Sachs. The bank on Sunday said it sees a 35% chance of a recession in the next 12 months, up from 20% previously.
The US dollar index, which measures the dollar’s strength against six foreign currencies, is down almost 4% this year, its worst start to any year since 2016.
Oil prices surged after Trump on Sunday said he would put secondary tariffs on “all oil coming out of Russia” if a deal to end the Russia-Ukraine war doesn’t come together and he thinks it was Russia’s fault. West Texas Intermediate crude, the US benchmark, surged 3% on Monday to hit $71.46 a barrel. Brent crude, the global benchmark, gained 2.68% to hit $74.71 a barrel.
Gold surged to a fresh record high. The most actively traded gold futures contract in New York on Monday rose above a record high $3,150 a troy ounce. Gold is considered a safe haven amid economic turmoil and a hedge against inflation. The yellow metal is up almost 20% this year and on track for its best quarter since 1986, according to FactSet data.
Tariffs have helped put stocks in a slump
Heading into this year, US stocks had been at record highs, with some strategists questioning how much room was to left to rally. Analysts had expected Trump to usher in a pro-business boom, enabling the stock market to continue its historic run.
However, Trump’s commitment to an economic agenda that prioritizes tariffs has left some investors perplexed. Trump has not given markets the same attention as he did in his first term, while investors have had to reckon with other factors on top of tariffs, such as debates over the value of the artificial intelligence boom. The tech-heavy Nasdaq is down 10.4% this year, posting its worst quarter since June 2022 and worst start to a year since 2020.
As Wednesday approaches, investors are still uncertain about the extent of the tariffs — and businesses and consumers are bracing for impact. Trump on Saturday told NBC News that he “couldn’t care less” if automakers raise prices because of tariffs.
“The administration cites fairer trade relationships as the goal, with reciprocity the governing principle for implementing tariffs. But beyond that, little is known about what this policy will entail,” analysts at Morgan Stanley said in a Monday note.
“This isn’t exactly reassuring to investors we talk to, who are perplexed by the dynamic of tariff announcements, negotiations, delays and shifting levels of implementation for Mexico, Canada, China and some key products,” the analysts said.
The yield on the 10-year Treasury note fell to an intraday low of 4.2% as investors snapped up bonds before settling around 4.24%, slightly below its previous close, as stocks rallied.
“The comments leading up to this are still a lot of mixed messages and so the uncertainty level is still high, and nobody really knows what to expect,” said Thomas Martin, a senior portfolio manager at Globalt Investments.
“We’re going to get an announcement and and we’re still not going to have clarity. And I think that’s the main thing we’re going to be living with for a while,” Martin said.
Global markets have similarly been shaken by Trump’s tariffs. In Japan, the benchmark Nikkei 225 tumbled more than 4% on Monday and closed in correction territory, down 10% for the first quarter. Taiwan’s benchmark index tumbled 4.2% and closed down 10% for this quarter.
In Europe, the STOXX 600 index sank 1.5%. Germany’s DAX index fell 1.33%.
Wall Street’s fear gauge, the Cboe Volatility Index, or VIX, surged higher Monday morning. “Extreme fear” was the sentiment driving markets on Monday, according to CNN’s Fear and Greed Index. Markets in March were driven by “extreme fear” on 16 trading days, the most in any month over the past year.
“Its all about the tariff uncertainty and how much tariffs and counter measures will be announced,” said Mohit Kumar, chief economist and strategist for Europe at Jefferies, in a note Monday.
