The S&P 500 Index ($SPX) (SPY) fell by -2.70% on Monday, with the Dow Jones Industrials Index ($DOWI) (DIA) down -2.08% and the Nasdaq 100 Index ($IUXX) (QQQ) dropping -3.81%. March E-mini S&P futures (ESH25) declined -2.58%, while March E-mini Nasdaq futures (NQH25) fell -3.75%.

Stock indexes experienced steep declines on Monday, hitting their lowest points in approximately five and three-quarters months. A combination of concerns regarding tariffs and reductions in the federal workforce has raised fears over consumer confidence and economic growth. Comments made by President Trump during a Sunday news segment heightened market pressure Monday, as he described the U.S. economy as entering “a period of transition” related to his tariff policies, and he did not dismiss the possibility of a recession. Notably, significant losses in the so-called Magnificent Seven stocks, alongside declines in chip stocks, contributed to the overall market downturn.

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Fears of a potential global trade war due to U.S. tariffs have also weighed heavily on market sentiment. Last Tuesday, President Trump enforced a 25% tariff on goods from Canada and Mexico, while doubling the tariff on Chinese imports from 10% to 20%. However, he provided U.S. automakers with a one-month tariff exemption and extended the same exemption on tariff compliance linked to the United States-Mexico-Canada Agreement (USMCA). Regardless, Trump reiterated his intent to implement reciprocal tariffs by April 2.

In addition, indicators of weakening demand within China raised concerns regarding global growth. China’s February Consumer Price Index (CPI) fell -0.7% year-on-year (y/y), worse than the anticipated decline of -0.4% y/y, representing the steepest drop in 13 months. Furthermore, January’s Producer Price Index (PPI) decreased by -2.2% y/y, also underperforming against expected figures of -2.1% y/y.

Bitcoin (^BTCUSD) saw an over -8% drop, hitting a four-month low. Market disappointment followed President Trump’s directive to create a strategic cryptocurrency reserve made up of seized assets instead of purchasing new cryptocurrencies.

This week, market participants will keep a close eye on Wednesday’s U.S. CPI report for February, anticipated to slightly ease to +2.9% y/y from +3.0% y/y in January. The core CPI for February is expected to decline to +3.2% y/y from +3.3% y/y in January. U.S. trade policies are also under scrutiny, with a 25% tariff on imports of steel and aluminum set to take effect on Wednesday. On Thursday, the final-demand PPI for February is projected to ease to +3.2% y/y from +3.5% y/y in January. On Friday, the University of Michigan’s March consumer sentiment index is expected to decrease by -1.2 to 63.5. Additionally, investors will monitor Congress’s efforts to pass a spending bill to prevent a government shutdown before the March 15 deadline.

Markets are currently pricing in a 7% chance of a -25 basis point rate cut at the next Federal Open Market Committee (FOMC) meeting on March 18-19.

Meanwhile, international stock markets presented mixed results on Monday. The Euro Stoxx 50 closed down -1.49%. China’s Shanghai Composite Index dipped -0.19%. However, Japan’s Nikkei 225 regained some ground, closing up +0.38% after hitting a five-and-a-half-month low.

Interest Rates

June 10-year T-notes (ZNM25) gained +24 ticks, with the 10-year T-note yield falling -10.1 basis points to 4.200%. Tariff concerns and increased safe-haven demand driven by declining equity prices supported the rise in T-notes. They also benefitted from positive shifts in European bond markets, particularly 10-year German bunds. Additionally, falling inflation expectations bolstered T-notes as the 10-year breakeven inflation rate dropped to a two-and-a-quarter month low at 2.311%.

Despite these movements, T-note prices faced supply pressures as the Treasury plans to auction $119 billion in T-notes and T-bonds this week, starting with a $58 billion auction of 3-year T-notes on Tuesday. European bond yields were mixed, with the 10-year German bund yield decreasing by -0.3 basis points to 2.833%, while the 10-year UK gilt yield increased by +0.6 basis points to 4.644%.

The Eurozone’s March Sentix investor confidence index rose by +9.8 points to a nine-month high of -2.9, exceeding expectations of -9.3. Furthermore, Germany’s January industrial production surged by +2.0% month-on-month (m/m), outpacing projections of +1.5% m/m, marking the most significant increase in five months. However, mixed trade statistics emerged; Germany’s January exports unexpectedly fell -2.5% m/m instead of the forecasted +0.5% increase, the largest drop in eight months. In contrast, imports rose by +1.2% m/m, above the anticipated +0.5% m/m.

Concerns were raised by ECB Governing Council member Kazimir, who stated that the ECB must remain cautious as “inflation risks remain tilted to the upside.” Current market expectations suggest a 49% chance of a -25 basis point rate cut by the ECB at its April 17 policy meeting.

US Stock Movers

The overall market was pressured by the underperformance of the Magnificent Seven stocks on Monday. Tesla (TSLA) dropped over -15%, leading the S&P 500 decliners amidst worries about declining sales figures. Nvidia (NVDA) fell more than -5%, contributing significantly to losses in the Dow Jones Industrials. Other notable declines included Apple (AAPL), down more than -5%, along with Alphabet (GOOGL) and Meta Platforms (META), which both fell over -4%. Finally, Amazon.com (AMZN) and Microsoft (MSFT) finished the day down more than -2%.

Chip stocks faced significant declines; Microchip Technology (MCHP) fell by more than -10%, while Marvell Technology (MRVL) dropped over -7%. ASML Holding NV (ASML), Lam Research (LRCX), NXP Semiconductors NV (NXPI), and Micron Technology (MU) all decreased by more than -6%. Broader chip sector weakness continued with Broadcom (AVGO), dropping more than -5%, while Analog Devices (ADI) and KLA Corp (KLAC) finished the day down more than -4%.

Concerns over consumer spending weighed on travel stocks, with cruise line operators like Carnival (CCL) and Norwegian Cruise Line Holdings (NCLH) down more than -7%. Similarly, United Airlines Holdings (UAL) retreated over -6%, while Delta Air Lines (DAL) decreased more than -5%. Additionally, Southwest Airlines (LUV) and Royal Caribbean Cruises Ltd (RCL) fell more than -3%.

Cryptocurrency-related stocks also suffered amid the declining price of Bitcoin. MicroStrategy (MSTR) fell by more than -16%, leading losses in the Nasdaq 100, while Coinbase Global (COIN), MARA Holdings (MARA), and Riot Platforms (RIOT) all experienced declines of more than -8%.

Rocket Cos. (RKT) saw its shares drop over -15% after announcing plans to acquire Redfin in an all-stock transaction valued at $1.75 billion.

Additionally, Dexcom (DXCM) was down more than -8% following the receipt of a warning letter from the FDA after inspections of its facilities in San Diego, California, and Mesa, Arizona. Emerson Electric (EMR) fell over -5% after being downgraded by Barclays.