Market Selloff Deepens as Recession Fears Grip Wall Street

Wall Street suffered a sharp decline as escalating trade tensions and recession fears triggered a massive selloff, particularly in the technology sector. The Nasdaq plunged 4%—its worst single-day drop since 2022—erasing $1.1 trillion in market value. The S&P 500 slid 2.7% to a six-month low, while the Dow Jones Industrial Average dropped nearly 900 points, erasing post-election gains.

The selloff was led by the "Magnificent Seven" tech stocks, as concerns over rising tariffs under President Donald Trump’s administration weighed on investor sentiment. Companies like Nvidia, Apple, Microsoft, Alphabet, Meta, and Amazon saw declines between 2% and 5%. Tesla suffered the heaviest losses, plummeting 15%, as its EV sales dropped 71% in Germany and 44% in France. UBS downgraded Tesla’s 2025 sales forecast, citing trade tensions delaying regulatory approvals in China.

The broader economic impact of the trade war is intensifying, with markets now anticipating an earlier-than-expected Federal Reserve rate cut in June. The 2-year US Treasury yield fell to 3.86%, the lowest since October 2024, reflecting concerns over slowing growth. The Federal Reserve Bank of Atlanta predicts negative GDP growth in Q1, primarily due to declining net exports.

President Trump acknowledged the economic slowdown, calling it a "period of transition" but defended tariffs as a strategy to "bring wealth back to America." Despite his reassurances, investors remain cautious, fearing further disruption to corporate earnings and economic stability.

In Europe, stock markets mirrored Wall Street’s downturn, despite recent all-time highs. The EUR/USD pair rose to 1.0854 as falling US bond yields made the dollar weaker. Germany’s increased defense spending led to higher European bond yields, highlighting a contrast with declining US Treasury yields.

Analysts warn that market volatility may persist until more clarity emerges on Trump’s trade policies and recession risks ease. A continued rotation from high-growth tech stocks to defensive assets is expected as uncertainty lingers in global markets.