U.S. stock futures sink further; Wall Street fear gauge surges
U.S. stock index futures plunged Monday, adding to the recent selloff, after the U.S. President Donald Trump reiterated his plans for sweeping trade tariffs, fueling recession fears, News. Az reports citing Investing.
At 07:20 ET (11:20 GMT), Dow Jones Futures tumbled 675 points, or 1.8%, S&P 500 Futures dropped 93 points, or 1.8%, and Nasdaq 100 Futures slipped 380 points, or 2.2%.
Investors were worried Wall Street might log its worst one-day decline since 1987’s “Black Monday,” when markets around the world crashed on heightened risk aversion.
In the two sessions after Trump’s tariff decision, the broad-based S&P 500 index has tumbled over 10%, erasing nearly $5 trillion in market value, marking its most significant two-day loss since March 2020, the onset of the COVID-19 pandemic. The benchmark index is now heading toward bear market territory.
Trump tariffs escalate trade war
President Trump said on Sunday that his new tariffs are the only way to fix major trade deficits with China and the European Union, declaring that duties will stay in place and investors must endure the consequences and that he would refrain from negotiating with China until the U.S. trade deficit is addressed.
He announced last week the implementation of a 10% universal import tariff, which came into effect April 5, with additional higher tariffs on major trade partners, including China, Vietnam, Japan, and the European Union, set to take effect on April 9.
In response to the U.S. tariffs, China has imposed matching 34% duties on American goods, further intensifying the trade conflict.
These developments have heightened fears of a global trade war, with significant implications for international commerce and economic stability.
Goldman Sachs lifted on Sunday its odds of a 2025 recession to 45% from 35% a week ago, after hiking its recession forecast last week. This follows JPMorgan raising last week the probability of a global recession this year to 60%, from the previous 40%.
Wall Street fear gauge surges higher
Investors are showing signs of extreme nervousness, with the CBOE Volatility Index (VIX) - the most well-known measure of market sentiment - surged above 60 intraday, which its highest level since August last year.
The VIX opened Monday with a sharp spike, and its futures curve has turned sharply inverted, signaling intense near-term market stress and a surge in demand for short-term hedging. The spread between the front-month and eight-month contracts has widened to levels not seen since the height of the COVID-19 crisis in 2020, according to Bloomberg data.
Markets are now fully pricing in five Fed rate cuts through 2025 as investors brace for a deeper economic shock. Treasury yields have dropped sharply, with demand rising on expectations of slowing growth.
Megacap stocks lead losers
Stocks have fallen across the board in premarket trade, with megacaps like Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA) and Amazon (NASDAQ:AMZN) continuing to bear the brunt of the selling.
Tesla (NASDAQ:TSLA) was also sharply lower, while Caterpillar NYSE:CAT), a big seller of construction equipment around the world, also slumped.
Crude falls to four-year lows
Oil prices continued to slump Monday, hitting four-year lows, as escalating trade tensions driven by the Trump administration’s tariffs stoked fears of a global recession that would hit demand for crude.
Both contracts declined more than 10% last week, and hit their lowest levels since April 2021 earlier in the session, as China - the world’s biggest crude importer - ramped up tariffs on U.S. goods, with the European Union set to follow suit this week.
Crude sentiment has also been hit by last week’s news that several members of OPEC+, the group which includes the Organization of Petroleum Exporting Countries and allies led by Russia, plan to accelerate production increases.
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