Investing.com - The S&P 500 closed sharply lower on Monday as President Donald Trump’s tariffs and attack on Federal Reserve Chair Jerome Powell stoked fresh volatility, weighing on investor sentiment.
At 4:00 p.m. ET, the benchmark S&P 500 fell 2.4%, the tech-heavy Nasdaq Composite fell 2.6%, and the blue-chip Dow Jones Industrial Average had retreated by 971 points, or 2.5%. Trading volumes were thin on Monday as some markets, including much of Europe, were on holiday for Easter Monday.
The VIX volatility index, a gauge of investor fears, jumped nearly 14% to around 34, though remains well below the recent highs seen during the market turmoil earlier this month. The long-term median level is at around 17.6, LSEG Datastream figures cited by Reuters showed.
Tariffs, Powell uncertainty weigh on sentiment
The slump in the broader market comes as investors further details on trade after Trump officials said they are aiming to sign dozens of agreements during the ongoing 90-day pause to the elevated duties on a host of nations.
"[I]t’s very likely April 2 was the high-water mark for tariffs, and we fully expect ongoing negotiations to yield ’deals’ that bring down the duty burden," analysts at Vital Knowledge said, referring to the date when Trump revealed his sweeping reciprocal tariffs on both friends and foes alike.
White House economic adviser Kevin Hassett added fresh volatility to markets after suggesting that Trump officials are studying if the president could fire Fed Chair Jerome Powell. Trump has revived threats to oust Powell from his role at the helm of the U.S. central bank, accusing him of moving to slowly to bring down interest rates.
In a post on his Truth social today, Trump again called on Powell to lower interest rates in a "preemptive" move, saying there is little to no inflation. "With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW," Trump said.
"Trump’s tariffs seem likely to fuel inflation and even if this rise is only ’transitory,’ markets will be on edge for the 6-12 months that the price adjustment takes place, with White House ire towards Powell steadily rising during that period," the Vital Knowledge analysts said.
Tech earnings eyed this week
Google-parent Alphabet (NASDAQ:GOOGL) and Elon Musk-helmed electric carmaker Tesla (NASDAQ:TSLA), who will become the first of the so-called "Magnificent Seven" mega-cap tech names to unveil their latest results this week.
Ahead of Tesla’s quarterly results due Tuesday, Barclays cut its price target on the stock to $275 from $325, citing "confusing" visibility.
Traders will likely be keen to see if the figures and potential guidance provide some relief for markets still reeling from massive ructions sparked by Trump’s tariff policies. In recent years, the Magnificent Seven stocks have largely been the driving force behind U.S. equity market gains, although shares in these businesses have declined so far this year.
Chipmaker Intel (NASDAQ:INTC), drug manufacturer Merck (NSE:PROR), tech firm IBM (NYSE:IBM), and Pampers-parent Procter & Gamble (NYSE:PG) are also on the earnings docket this week, as well as American Airlines (NASDAQ:AAL). The carrier’s rival United Airlines last week provided a two-pronged outlook for the year, including one scenario forecasting a recession that sparks a deep hit to revenue and profit.
Elsewhere, shares in Netflix (NASDAQ:NFLX) rose after executives at the streaming service suggested that they were confident that it could withstand the economic fallout from Trump’s tariffs.
Amazon.com Inc (NASDAQ:AMZN), meanwhile, fell more than 4% after Wells Fargo, citing industry sources, suggesting that the company’s cloud segment AWS is slowing data center deals.
Gold touches new record high; Bitcoin climbs
Gold prices hit a new record high on Monday, supported by fears over a tit-for-tat trade war between the U.S. and China as well as a weakening dollar against a basket of currency peers.
Spot gold had risen by 3% to $3,432.52 by 12:52 p.m. ET.
Bitcoin (BitfinexUSD), meanwhile, climbed more than 2% to $87,222.0 as the popular crypto also benefitted from a slump in the dollar.
(Scott Kanowsky contributed to this report)