Wall Street continues its slide amid growing chances of a recession from President Trump's trade war with Canada, Citigroup warned that U.S. stocks appear to be poised to fall below overseas markets.
The Dow Jones industrial average on Tuesday fell nearly 600 points before unlocking some of the losses at the start of trading Tuesday.
The Blue Chip Index, which fell 2.1% on Monday, closed 478.23 points (1.1%). The S&P 500, which fell 2.7% a day ago, was 0.7% off. The NASDAQ fell 0.2% after a plunge 4% a day ago, helping to recover some epic seven stocks.
Meanwhile, Ontario Prime Minister Doug Ford announced Tuesday that Canada's most populous province has suspended 25% additional charges for electricity exports to the United States.
In an X's statement, Ford had a “productive conversation” with Commerce Secretary Howard Lutnick, who said the two will meet in Washington on Thursday with US trade representative Jamieson Greer.
Stock market volatility is created as Citigroup strategists downgrade their outlook for US stocks from overweight to neutral, indicating that control over US-based stocks is taking a temporary suspension. According to Bloomberg News.
Bank analysts expect economic data to be weak in the coming months, noting in the report that uncertainty surrounding tariffs and government job cuts has contributed to one of the worst weeks of the S&P 500 of this century compared to global markets.
The strategist wrote for the coming months that “US exceptionalism is at least suspended.”
“The news flow from the US economy is likely to shake the rest of the world in the coming months,” they added.
HSBC Holdings PLC Strategists reiterated this sentiment, downgrading US stocks to neutral on Monday, citing “better opportunities elsewhere for now.”
Ned Davis Research made a similar change last week, noting that market momentum was deteriorating.
Over the past year, US economic policymakers have focused on turning their economy towards “soft landings,” with the aim of curbing inflation without causing a recession.
However, the new administration appears to be reconsidering its approach, and authorities openly acknowledge that their revised strategy could lead to a more tumultuous recession.
Recently, President Trump and his senior advisers have shown a shift in perspective, with little concern about the possibility that economic uncertainty could reduce private investment.
They suggested that a period of spending and employment “detoxing” may be necessary, downplaying the importance of declining stock prices and indicating that inflation could rise in the short term.
In an interview that aired Sunday about Fox News, Trump shunned concerns about the imminent recession.
“There's a transition period because what we're doing is so big,” he said. “All I have to do is build a strong country. You can't really see the stock market.”
Later that night, on board the Air Force 1, he doubled his stance when asked to clarify what he said.
“Taxes will be the biggest thing we have ever done as a country. It is going to enrich our country again,” he insisted.
His comments rattled financial markets on Monday, plunging the Dow Jones industrial average by 890 points, resulting in a 2.1% drop.
All three major indices have fallen below levels since last November's election day.
Meanwhile, Delta Air Lines reduced its first quarter revenue and revenue forecasts after the market closed, citing weakening domestic demand. Stocks fell to 7.3%
Delta CEO Ed Bastian told CNBC that the company noticed a “slightly large change” in sentiment as “consumer spending began to stall” in February.
Business trips were also a hit.
“If there are places where people don't really know what's going on, businesses are pulling back,” Bastian added.
Among the administration's top advisors, Commerce Secretary Howard Lutnick warns that tariffs could lead to a one-off surge in prices.
Treasury Secretary Scott Bescent suggested that a reset could be inevitable after years of economic expansion due to government spending and rising asset prices.
“We'll see if there's any pain,” Bescent said Friday on CNBC.
Trump has inherited a robust stock market performance but steadily growing economy with underlying weaknesses, such as the stagnant housing sector and slowing the labour market.
At the beginning of the year, investors largely overlooked these vulnerabilities and were hoping that the new administration would prioritize growth initiatives.
Stock markets surged after Trump's election in November as investors anticipated professional business policies such as tax cuts and deregulation that were reminiscent of his first term in 2017.
“People could only see the good side of what Trump had promised. It basically evaporated, and now we're back to the recession clock.” He told the Wall Street Journal.
Analysts are paying attention to significant changes in the administration's message.
Initially, authorities seemed to have intended to downplay concerns about rising government bond yields and hold them accountable for the recession of the resignation of the Biden administration.
Meanwhile, Goldman Sachs, which has consistently predicted average economic growth in recent years, has taken a more cautious attitude.
Analysts are currently forecasting weaker growth compared to other Wall Street forecasts, increasing the odds of a 12-month recession from 15% to 20%.
