US Market Sell-Off Worsens; Recession Fears To Trump's Tariffs, Reasons Why DJIA, S&P 500, Nasdaq Are Falling?

The US stock market extended its losses for the second consecutive day this week, making it the worst start for a Presidential term since 2009, which was during the great recession period. This led to the Dow Jones, Nasdaq Composite and S&P 500 indexes to decline by 3% to 5% in five sessions straight. Trillions of dollars of investors' wealth have been wiped out. Here are five reasons why bearish sentiment in US stocks has intensified.

On Tuesday, the Dow Jones Industrial Average ended at 41,433.48, down by 478.23 points or 1.14%. While the S&P 500 index slipped by 42.49 points or 0.8% to end at 5,572.07. Lastly, the Nasdaq Composite plunged by 32.23 points or 0.2% to finish at 17,436.10.

As per Trading Economics, all 11 S&P 500 sectors ended in the red, led lower by industrials, consumer staples, and healthcare. Notable losses were also seen from key tech names such as Apple (-2.9%), Alphabet (-1.1%) and Oracle (-3.1%). Adding to market concerns, President Donald Trump announced on Tuesday that he would double tariffs on Canadian steel and aluminium to 50%, effective Wednesday, in response to Ontario's decision to impose a 25% levy on electricity exports to the US. However, Ontario Premier Doug Ford later stated that he would pause the surcharge.

The current US market situation is such that the S&P 500 is down by 10% from its record high. On Monday, the S&P 500 posted its worst single-day drop since December 18, erasing approximately $1.3 trillion in market value in a single session. From its peak, the S&P 500 has lost a whopping $4 trillion market value. Also, the two consecutive declines this week in the S&P 500, make it the biggest selloff since early August 2024.

Additionally, the Nasdaq has corrected about 10% from last week.

In the past five sessions, Dow Jones Industrial Average has nosedived by 1,084.77 points or 2.55%, while S&P 500 has plummeted by 209.29 points or 3.62%. Nasdaq took the most hit in terms of percentage, plunging by 876.87 points or 4.79%.

Prashanth Tapse, Senior VP (Research), Mehta Equities said, "Since Donald Trump's return as the 47th president of the United States, global stock markets have been volatile, with US stocks facing their worst start to a presidential term since 2009. Unpredictable trade policies and recession fears in the US are fueling uncertainty, leading to panic selling."

Since joining the White House in late January, the 47th President has announced intensive tariffs on foreign countries including Mexico, China and Canada. In the latest development, Trump threatened to double US tariffs to 50% on Canadian steel and metal imports but backed down from the plan hours later.

However, Canada will still face a 25% tariff which will come into effect from March 12. Mexico imports also face a 25% tariff, while 10% additional tariff on imports from China. Trump has also announced reciprocal tariffs for other foreign countries including the European Union, India, South Korea and more.

His tariffs are likely to hurt the economy.

Trump's tariff is likely to fuel a trade war with the countries facing the import tax from US, especially China.

Then comes the recession fear! Trump has not ruled out the possibility of recession in USA due to his tariff implementation.