Global markets today: Trump’s tariffs tailspin worsens; Dow Jones, S&P 500 logs highest two-day decline since COVID

Global market today: After strong selling in the Asian and European stock markets, the US stock market witnessed the worst crisis since COVID-19. Wall Street nosedived for the second straight session, confirming the Nasdaq Composite index and Dow Jones Industrial Average were under the bears' grip. In the last two days post-Trump's tariffs, the DJI nosedived from 42,225 to 38,314, recording a 9.26% decline. The S&P 500 index slipped from 5,670 to 5,074 levels, logging over a 10.50% decline in two straight sessions. The Nasdaq Composite index crashed from 17,601 to 15,587 levels, registering a nearly 11.45% loss in the last two sessions last week.

A record-breaking number of shares were traded on Friday, with volume on US exchanges around 26.79 billion, beating the previous high of 24.48 billion shares traded on January 27, 2021.

The CBOE Volatility Index surged from 21.51 to 45.31, logging over 110% rise in the last two sessions. For the week, the S&P 500 fell 9.1%, the Dow declined 7.9%, and the Nasdaq slumped 10%.

According to stock market experts, the Chinese government's move to impose an additional 34% tariff on US goods, and the US Fed Chair Jerome Powell is concerned that the looming trade war may slow growth and fuel inflation. They said that Trump's tariff has affected the American currency as the US dollar rates hit a six-month low on Thursday. This also fueled the selling pressure on Wall Street during the weekend session.

Why is the US stock market falling?

Speaking on the US stock market crash, Avinash Gorakshkar, Head of Research at Profitmart Securities, said, "This bloodbath in global markets can be attributed to the US President Donald Trump's tariff tailwinds. This aggressive approach has renewed the fear of a trade war, which is expected to hit global economic growth and may lead to global recession. The US Fed Chair also raised this concern on Friday, which intensified the selling pressure in the US stock market following the 34% additional tariff announcement by the Chinese government on the US goods."

"Right now, how bad it gets depends on how committed the administration is to this set of policies which the market is voting against," said Steve Sosnick, chief strategist at Interactive Brokers.

Global governments began reacting to Trump's tariff announcement on Friday, undermining investor sentiment that a global recession could be averted. JP Morgan said it was forecasting a 60% chance of the global economy entering a recession by year-end, up from 40%.

Renewed fear of US recession

Pointing to the looming recession fear, Peter Tchir, head of macro strategies at Academy Securities, said, "We are rapidly headed towards recession. The world was prepared for 'reciprocal tariffs.' Whatever the abomination that was launched at the Rose Garden was, it is a disaster—mostly for the US but also for the global economy."

US stock market outlook

Gorakshkar said the US stock market volatility may continue on Monday as the US dollar index hit a six-month low following Trump's tariffs tailwind. The CBOE Volatility Index has skyrocketed over 110% post-tariff announcement by US President Donald Trump.

"When there is fear in the market, as the VIX tells us, everything will sell-off," said Jay Woods, chief global strategist at Freedom Capital Markets. "It does feel like the sky is falling off. This scenario is very different because we are at the whim of Washington."

(With inputs from Reuters, Bloomberg)

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