What had been a steady pullback from the U.S. stock market accelerated sharply Monday as investors retreated from virtually every type of risk.
Tech stocks tumbled by the most since 2022 — driving the Nasdaq 100 Index down nearly 4%. Crypto prices slid. Corporate bond sales were scrapped. A gauge of credit risk surged. And Treasuries rallied, pulling yields down steeply, as they reprised their role as the haven of last resort.
Within the stock market itself, shifts in and out of different sectors told the same story: Growing fear that President Donald Trump’s tariff hikes, spending cuts and geopolitical shakeups will stall what until recently has been an economy that constantly defied naysayers with its strength.
Trump and his surrogates have started warning that retooling the US economy may bring some near-term pain — and investors are preparing for just that. As the carnage piled up, they took refuge in shares of energy, consumer staples and utility companies — relatively spending-cut free industries that tend to fare well during recessions.
“If you’re a long-only equity investor, you still have to put your money somewhere,” said Steve Sosnick, chief strategist at Interactive Brokers. “If investors perceive that there’s rough weather ahead, these are the places where investors tend to hide out. Shelter from the storm.”
The movements show the remarkable shift in sentiment less than two months into Trump’s presidency, which was once seen as likely spur the market forward by pouring stimulus onto an already solidly expanding economy.
Instead, there’s now building angst that the chaotic rollout of Trump’s tariff hikes and spending and job cuts across the federal government will have the opposite effect. And that’s threatening a major reversal for a US stock market that had rallied to record highs as the engine of American corporate profits kept humming.
“Investors are starting to whisper the ‘R word,’ recession,” said Sam Stovall, chief investment strategist at CFRA. “Bull markets don’t die of old age, they die of fright. And what they’re most afraid of is recession.”
Of course, Trump and his administration had started signaling that it may be just a needed adjustment period as they try to pare back the government’s role in the economy and tame the swelling federal deficit. They have said that’s key to getting interest rates back down, which in turn would reduce the cost of mortgages and loans across the economy. And bond yields have dropped significantly on expectations the economy will cool, providing some relief.
‘Off a cliff’
But the stock market’s movements show that investors are anticipating it may entail considerable pain.
Discretionary stocks — which include consumer good such as autos, textiles and apparel, leisure equipment, hotels, restaurants, media production and services and retail — are among those that have been hit in the recent selloff due to a combination of tariff uncertainty, fear of inflation ticking higher and slowing growth. Consumers tend to spend less on discretionary items in a recession, which hits earnings and ultimately bleeds over into stock prices.
“Consumer sentiment has fallen off a cliff,” Sosnick said. “When consumer sentiment stinks, people do tend to pull back on discretionary spending.”
Defensive equity havens
On the other hand, defensive sectors that investors typically flock to in times of uncertainty are doing well. At the top of the list are consumer staples and utilities stocks. Staples includes things such as food, beverages, basic household goods and hygiene products as well as alcohol and tobacco.
The utilities group includes gas, electric and water companies. They’re considered safety plays because demand for power and water is fairly stable regardless of what the economy does, and they usually pay high dividends, providing a guaranteed return.
“Even if times are tough and people are pulling back, you’re still going to brush your teeth. You still need toothpaste, you still need toilet paper, you still need food,” Sosnick said.
Finance slips
The KBW Banking Index has shed more than 15% since the S&P 500 Index’s late-February record and is coming off its worst week since March 2023, as it unwinds a more than 30% gain in 2024.
The most recent downturn has reversed the gains banking stocks posted after the November presidential election, when investors bet the Trump administration would roll back regulations and adopt other policies that would aid the industry. But those looser regulations have yet to pan out and the impacts may be overriden by any deterioration in the economy.
Amy Wu Silverman, RBC Capital Markets equity derivatives strategist, said the selloff has so far been orderly. But she said it’s at risk of worsening as investors keep pulling back.
“There’s going to be a period where I think it’s going to be panic at the disco,” she said on Bloomberg Television. “We haven’t gotten there yet but as these levels climb there will be unwinds and more uncertainty that triggers even more.”
Technology slumps
Much of the selling was centered on the nation’s biggest technology company, the dominant driver of gains in recent years.
The tech-heavy Nasdaq 100 fell 3.8%, pushing it deeper into a correction. A Bloomberg index of the Magnificent Seven group shed over 5%. The Philadelphia Semiconductor Index sank nearly 5%, extending losses that already pushed the gauge into a bear market. Meanwhile, Nvidia Corp., which had been the biggest winner in the artificial intelligence trade, has shed about $1 trillion in market value in just two months.
With assistance from Jessica Menton.
Carmen Reinicke and Matthew Griffin, Bloomberg News
©2025 Bloomberg L.P.
