[New York Stock Market] 'Black Monday' Shock from Trump-Induced Recession Fear... Nasdaq Plunges 4%

Trump Signals Tariff Policy Will Continue Despite Recession Fears
"Strong U.S. Economy" White House Reassures, But Panic Selling Persists
Wall Street Lowers Growth Forecasts and Raises Recession Odds
Morgan Stanley: "S&P 500 Could Drop Up to 20%"

The three major indices of the U.S. New York stock market plunged on the 10th (local time) due to the Trump-triggered fear of 'R (Recession)'. The Nasdaq index fell sharply by 4%, marking its worst day in two and a half years. U.S. President Donald Trump's statement that he would push ahead with tariff policies even at the risk of a recession is driving Wall Street into a fear of economic downturn.

AFP Yonhap News

Trump Predicts Tariff Blitz Despite Recession... Nasdaq Plunges 4%

On that day in the New York stock market, the Dow Jones Industrial Average (Dow) focused on blue-chip stocks closed at 41,911.71, down 890.01 points (2.08%) from the previous trading day. The S&P 500 index, centered on large-cap stocks, ended trading at 5,614.56, down 155.63 points (2.69%). The tech-heavy Nasdaq index closed at 17,468.33, plunging 727.9 points (4.0%), marking the largest daily drop in two and a half years since September 2022.

Among individual stocks, large tech stocks showed a sharp decline. U.S. electric vehicle maker Tesla plummeted 15.43%, the largest single-day drop since 2020. AI leader Nvidia fell 5.07%. Alphabet, Google's parent company, and Meta, Facebook's parent company, dropped 4.41% and 4.42%, respectively.

President Trump's recession remarks the previous day triggered the stock market plunge. In an interview with Fox News aired on the 9th, when asked about the possibility of a recession this year, he said, "I don't want to predict such a thing," but added, "We are doing something very big to bring wealth back to America, and there is a transition period in such matters." He hinted at maintaining the tariff policy and did not rule out the possibility of a temporary recession. President Trump also reaffirmed his intention to implement reciprocal tariffs on the 2nd of next month. On the same day, U.S. Commerce Secretary Howard Lutnick announced that a 25% tariff on all steel and aluminum products entering the U.S. would be imposed as scheduled on the 12th.

As recession concerns spread, the White House immediately moved to contain the situation but failed to calm the panic-stricken investor sentiment. Kevin Hassett, chairman of the White House National Economic Council (NEC), said in an interview with CNBC News that the forecast of negative U.S. economic growth in the first quarter of this year is "a very temporary phenomenon" and that "there are many reasons for the economy to show strong performance going forward." He explained that the situation would improve once tariff uncertainties are resolved in April, as companies have postponed investments ahead of the economic policies of former President Joe Biden and the imposition of reciprocal tariffs.

Wall Street Downgrades U.S. Growth Forecasts... "S&P 500 Could Fall Up to 20%"

Major Wall Street banks have successively lowered their economic growth forecasts for this year amid tariff policy uncertainties. Goldman Sachs said the trade policy is quite negative and downgraded the U.S. annual GDP growth forecast for this year from 2.4% at the beginning of the year to 1.7%. The probability of a U.S. recession in the next 12 months was raised from 15% to 20%. JP Morgan increased the recession probability from 30% to 40%. Earlier, Morgan Stanley had already lowered its GDP growth forecast for this year from 1.9% to 1.5%. The fear of R, that President Trump's tariff hikes will lead to inflation, reduced consumption, decreased corporate investment, and slower growth, is rapidly spreading. Shelby MacFaddin, an investment analyst at Motley Fool Asset Management, said, "The administration is seriously saying for the first time that the goal will cause pain." George Cipollini, portfolio manager at Penn Mutual Asset Management, said, "This administration is fundamentally different from the previous one" and warned, "It could lead us to a potential hard landing."

Stock market outlooks have also been downgraded one after another. Morgan Stanley predicted that if signs of recession appear, the S&P 500 index could fall by up to 20%. Michael Wilson, head of U.S. equity strategy at Morgan Stanley, said, "If growth falls further and a recession occurs, the S&P 500 could drop nearly 20% from current levels," adding, "We are not there yet, but the situation can change quickly." JP Morgan sees the S&P 500 falling to 5,200, and Citigroup to 5,500. Last December, the top 10 major banks had forecasted the S&P 500 to rise 10% by the end of 2025 to 6,550. Sam Stovall, strategist at CFRA Research, analyzed, "We are in extreme pain from an artificial adjustment based on the new administration's tariff program or tariff threats."

The Chicago Board Options Exchange Volatility Index (VIX), known as Wall Street's 'fear index,' surged 19.04% to 27.81 points compared to the previous trading day.

Amid tariff policy uncertainties, demand for safe-haven assets has surged, pushing up bond prices and lowering bond yields. The U.S. 10-year Treasury yield, a global benchmark for bond yields, fell 10 basis points (1bp=0.01 percentage point) to 4.21% from the previous trading day, and the 2-year Treasury yield, sensitive to monetary policy, dropped 10 basis points to 3.89%. Expectations that the Fed might accelerate monetary easing due to a recession are also pulling down Treasury yields.

Meanwhile, this week will see the release of inflation indicators that could influence the timing of the Federal Reserve's resumption of rate cuts. On the 12th, the Consumer Price Index (CPI), a retail price indicator, will be released, followed by the Producer Price Index (PPI), a wholesale price indicator, on the 13th. These are the last inflation indicators before the March Federal Open Market Committee (FOMC) regular meeting on the 18th-19th.