US Markets Tumble: Dow Jones Drops 650 Points, S&P 500 Falls 2% After Trump Tariffs

US Markets Tumble: Dow Jones Drops 650 Points, S&P 500 Falls 2% After Trump Tariffs

US markets reversed all of last Friday’s gains following a sharp sell-off on Monday. The US Dollar surged, bond yields dropped, and oil prices also fell.

On Monday, the S&P 500 dropped 1.8%, turning negative for the year and marking its worst day since December. The Dow Jones plummeted by 650 points, losing as much as 800 points from the day's highs. The Nasdaq Composite declined nearly 2.7%, led by an 8% drop in Nvidia shares.

For most of the morning, the indices hovered near the flat line but plummeted after US President Donald Trump announced a 25% tariff on Canada and Mexico. The tariffs were set to take effect on Tuesday, dispelling hopes for a last-minute trade deal that had been in the works. Trump stated, “No room left for Mexico or Canada,” adding that the tariffs would begin the following day and would be followed by a 10% additional tariff on China.

The drop in US stocks coincided with a wave of disappointing economic data, including weaker housing numbers, rising unemployment claims, and a decline in personal spending. Crypto markets, a key indicator of risk appetite in post-election markets, also took a hit after Trump intensified calls for a digital-asset stockpile.

Callie Cox of Ritholtz Wealth Management commented, "It’s time to be nervous... While there’s no strong evidence we’re headed for a deep pullback, the economy is changing quickly, and the constant headlines are leaving people uncertain about what to do next."

In contrast to the US market, European equities posted one of their strongest advances of 2025, continuing the international rotation trade that has dominated the year. Wall Street’s volatility index, the VIX, surged to its highest level since December.

Shares of major tech companies fell, with Nvidia down 8.7%. Taiwan Semiconductor Manufacturing Co. announced plans to invest an additional $100 billion in US manufacturing plants, aligning with Trump’s goal to boost domestic production.

Oil prices sank, as OPEC+ proceeded with plans to restart production, responding to Trump’s pressure to lower prices. The yield on 10-year Treasuries decreased by five basis points to 4.16%, while a dollar gauge slid 0.4%. Bitcoin dropped by 9.5%.

With softening economic indicators and ongoing tariff uncertainties, JPMorgan strategists believe the rotation from US tech stocks to international value stocks will continue. While international markets, which are more value-oriented, could benefit, the US market is likely to hold up better during risk-off periods, thanks to deregulation and investor sentiment.

Morgan Stanley’s Michael Wilson noted that equities are likely to be more responsive to economic growth than bond yield fluctuations.

Citigroup strategists, led by Scott Chronert, warned that US earnings estimates may not fully account for the risks posed by President Trump’s proposed tariffs.

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