Wall Street weathered another chaotic day of trading on Monday, as false reports about a potential tariff reprieve briefly sent stocks sharply higher before concerns over the prospects of a severe economic downturn flooded back to the forefront.
The S&P 500 swung from a loss of as much as 4.7 percent, to a gain of as much as 3.4 percent in morning trading. Volatility surged. The CBOE Vix Volatility index, known as Wall Street’s fear gauge, rose to levels last seen during the pandemic-induced sell-off in March 2020.
By the early afternoon, the S&P 500 was unchanged and roughly 18 percent below its February peak. The index is on the precipice of a bear market — a rare marker of extreme market pessimism when stocks fall 20 percent from their peak.
“There’s no sign yet that markets are finding a bottom and beginning to stabilize,” analysts at Deutsche Bank wrote in a note.
The overarching concern for investors hasn’t changed. Investors are worried that steep tariffs imposed by the United States on huge swaths of imports, and the tit-for-tat response from China and other countries, will sink global growth and fuel inflation. The cause of Monday’s brief rally — a false report that President Trump is considering delaying the new tariffs — showed just how desperate investors are for any sign that the White House is hearing their concerns.
Asked earlier in the day about the possibility of a ninety day pause on the expansive tariffs announced by Mr. Trump last week, Kevin Hassett, the director of the National Economic Council, said on Fox News: “I think the president is going to decide what the president is going to decide.”
It appeared the comments, aired live, were then misinterpreted as Mr. Hassett saying the president is considering a pause, before the false information gathered steam on social media.The hedge fund manager Bill Ackman had said on Sunday that he supported Mr. Trump’s attempt to fix global tariffs, but implored the president to call a “90-day time out” on Monday.Otherwise, “We are heading for a self-induced, economic nuclear winter, and we should start hunkering down,” he said. “May cooler heads prevail.”
Analysts have warned that the damage to the economy will depend on how long tariffs remain at elevated levels.
“The quicker this issue is resolved, the better because some of the negative effects increase cumulatively over time and would be hard to reverse,” Jamie Dimon, the chief executive of JPMorgan Chase, wrote in his annual letter to shareholders on Monday.
Some bank economists are already forecasting that the economy will slip into recession later this year. Others hold out hope that the strength of the economy before Mr. Trump took office can withstand the current turmoil ahead of being boosted by more business friendly policies later this year.
On Monday, Mr. Trump doubled down, threatening China with a 104 percent tax on its exports to the United States starting later this week if it doesn’t rescind its tariffs on American products. After Mr. Trump announced last week that he would impose a new 34 percent tariff on China, Beijing responded by threatening to impose a 34 percent tax on U.S. imports.
China’s levies are set to go into effect later this week, shortly after the Trump administration’s “reciprocal” tariffs on dozens of countries are imposed. On Saturday, a 10 percent “baseline” tariff came into effect on nearly all goods coming into the United States.
Stocks in Europe fared far worse than those on Wall Street. A benchmark pan-European index fell about 4.5 percent. Among the markets hardest hit in Asia were Hong Kong, where stocks plunged 13 percent, and Taiwan, where they tumbled 10 percent. Stocks in mainland China were down 7 percent.
Over the weekend, analysts had circulated notes warning that Asia could be particularly vulnerable to a tit-for-tat exchange of retaliatory tariffs between China and the United States. Many countries in the region, including Japan and South Korea, count both nations as their top trading partners.
In Japan, declines were so sharp that the country’s exchange operator briefly halted trading in Japanese stock futures on Monday morning. The country’s Nikkei 225 index closed down more than 7 percent.
Japan’s Nintendo, which cited tariffs when it delayed pre-orders for the sequel to its best-selling Switch video game console, declined more than 7 percent.
Oil prices fell about 1.5 percent, adding to steep losses last week, also coming off their worst declines of the day.
The 10.5 percent drop in the S&P 500 on Thursday and Friday was the worst two-day decline for the index since the onset of the coronavirus pandemic in 2020.
The only other instances of a worse two-day drop came during the 2008 financial crisis and the 1987 stock market crash, according Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices. In dollar terms, the more than $5 trillion that was wiped out in the S&P’s value in the two days last week stands unmatched.
Even more unusual is that last week’s sell-off stemmed directly from presidential policy.
“If they’re maintained, the tariff hikes announced April 2 represent a self-inflicted economic catastrophe for the United States,” Preston Caldwell, a senior U.S. economist for Morningstar Research Services, said in a blog post on Friday.
Chief executives have begun warning consumers that they should expect prices to increase on some groceries, clothes and other products. Consumers have said they intend to rein in spending on big-ticket items. Some auto companies have already announced production pauses overseas, as well as job losses domestically. Bank economists have raised the odds that a recession will hit the United States over the next 12 months.
Keir Starmer, the British prime minister, warned on Saturday that “the world as we knew it has gone” and urged countries not to retaliate against the United States and enter a full-blown trade war.
Scott Bessent, the Treasury secretary, said on Sunday on the NBC program “Meet The Press” that he saw “no reason” to expect a recession.
But analysts are worried.
“We remain very cautious,” said Stuart Kaiser, an equity analyst at Citi. Even with last week’s drop, he said, markets may have further to fall because earnings and economic growth expectations remain “well above levels consistent with announced tariff levels.”
Tony Romm contributed reporting.
River Akira Davis covers Japan, including its economy and businesses, and is based in Tokyo.
Eshe Nelson is a reporter based in London, covering economics and business news for The New York Times.
Joe Rennison writes about financial markets, a beat that ranges from chronicling the vagaries of the stock market to explaining the often-inscrutable trading decisions of Wall Street insiders.
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