Global financial markets faced significant downward pressure amid escalating risk aversion. The S&P 500 declined 2.7%, the Dow Jones Industrial Average fell 2.1%, and the Nasdaq Composite plummeted 4%. Tesla experienced a sharp 15% drop, marking its steepest intraday decline since September 2020. Asian markets also struggled, with Hong Kong’s Hang Seng Index losing 1.8%.
The sell-off extended to the cryptocurrency market, where Ethereum slipped below $1,900 per token and Bitcoin fell below the $78,000 threshold. In the commodities sector, spot gold dropped 1% intraday, reflecting a broader shift toward risk-off sentiment. However, European equities demonstrated relative resilience, with the pan-European STOXX 50 futures advancing 0.55%, signaling a degree of investor optimism despite prevailing macroeconomic uncertainties.
If the economy enters a recession, the Federal Reserve may respond with a series of rapid rate cuts beginning in June. While institutional analysts anticipate no immediate changes to interest rates at next week’s policy meeting, mounting concerns over a potential downturn triggered by trade tensions could prompt the Fed to initiate an aggressive easing cycle by mid-year.
Futures market data indicates growing expectations for the Fed to implement three 25-basis-point rate cuts in June, July, and October. This shift in market sentiment followed remarks by U.S. President Donald Trump over the weekend regarding a “transition period,” as he announced additional tariffs on multiple countries. Concerns that these measures could exacerbate economic fragility led to declines in U.S. equities and Treasury yields on Monday.
Market participants remain wary of the Fed’s response, particularly as policymakers balance the risks to their dual mandate—price stability and maximum employment—against external pressures, including potential political influence. A delayed reaction from the central bank could intensify market volatility and heighten tensions with the administration.
Today’s Economic data and Events
- U.S. President Donald Trump Speaks
- US NFIB Small Business Confidence Index for February