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04.04.2025 11:14 AM
Stocks slide sharply as broad tariffs raise recession risk

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S&P 500

US equities plunged on Thursday as President Donald Trump's sweeping new tariffs triggered a sharp sell-off and reignited fears of a global recession.

The Dow fell by 4%, the Nasdaq declined by 6%, and the S&P 500 dropped 5% to close at 5,396, now trading within a volatile 5,300–5,900 range.

Important note on index figures:

Since President Trump announced new broad-based import tariffs immediately after the market closed on Wednesday, much of the decline reflected in Thursday's index numbers actually occurred late Wednesday and was covered in our April 3 market update. However, from a technical standpoint, the drop is recorded on Thursday.

Despite the market plunge, Trump responded Thursday with confidence that everything is going to be well. "The markets are going to boom, the stock is going to boom, the country is going to boom," Trump said on the South Lawn.

Overview on April 4

Markets tumbled Wednesday and Thursday following Trump's announcement of comprehensive tariffs on nearly all US trading partners.

The Dow Jones Industrial Average fell by more than 1,500 points, the Nasdaq Composite lost 6 percent, and the S&P 500 declined by 4.8 percent.

The administration implemented a 10 percent tariff on all imports starting April 5.

Higher rates are set to take effect from April 9 for specific countries, including a 34% tariff on top of an existing 20% rate on Chinese goods. Japan, Vietnam, and India face tariffs of 24%, 46%, and 26%, respectively.

The European Union will be subject to a 20% tariff.

The move intensified concerns over economic deceleration and triggered a broad sell-off in risk assets.

The small-cap Russell 2000 index fell by 6.6%, while large-cap technology stocks took a heavy hit. Consumer discretionary sectors also came under heavy pressure. Apple (AAPL, $203.19, -$20.70, -9.3%) significantly weighed on the broader market, alongside NVIDIA (NVDA, $101.80, -$8.62, -7.8%) and other semiconductor stocks.

Economic slowdown fears also spilled over into the oil market. WTI crude fell to $67 per barrel, dragging the energy sector down by 7.5%—among the session's worst performers, alongside technology (-6.9%) and consumer discretionary (-6.5%).

US Treasuries rallied strongly as investors fled equities, causing yields to plunge.

The 10-year yield fell by 14 basis points to 4.06%, and the 2-year dropped by 18 basis points to 3.72%.

Key economic data:

Weekly Initial Jobless Claims: 219,000 (consensus 224,000; prior revised from 224,000 to 225,000)

Continuing Claims: 1.903 million (highest since November 2021; prior revised to 1.847 million)

While initial claims remain low, the rise in continuing claims suggests jobseekers are facing increasing difficulty securing employment.

February Trade Balance: -$122.7 billion (consensus -$121.0 billion; prior revised to -$130.7 billion)

Despite a modest improvement, the trade deficit remains historically high, largely due to front-loaded imports ahead of April tariffs.

March S&P Global US Services PMI (final): 54.4 points (previous 54.3 points)

March ISM Services Index: 50.8% (consensus 53.2%; prior 53.5%)

The services sector slowed notably in March, with employment falling for the first time since September.

On Friday, investors will closely watch the March Non-Farm Payrolls report, due at 8:30 AM ET, for further market direction.

Energy market update: Brent crude fell sharply to $69.60 per barrel, plunging from nearly $75 and breaking below the $70 threshold. The decline was driven not only by the US market sell-off and Trump's tariff announcement but also by OPEC+'s unexpected decision to increase oil output significantly beyond previous plans. This development has intensified downside pressure, and oil may continue to weaken in the near term.

Conclusion: The US market rally has not only stalled, but it has been decisively reversed. It may remain that way for some time. With Trump's new tariffs now in effect, the risk of a recession is no longer limited to the US. Thus, a global economic downturn is a real possibility. Should it materialize, this would mark the third worldwide recession in the past two decades, alongside the 2008–2009 financial crisis and the 2019–2020 COVID-induced collapse.

However, for now, there remains a chance that the current move is a deep correction rather than a full-fledged crash. Under current conditions, new purchases appear highly risky. Entry points may only become viable once a clear bottoming formation appears on the daily chart, ideally, following a visible upward rebound.

As for earlier long positions, they may now need to be considered long-term investments—potentially stretching over several years in a worst-case scenario. This is not catastrophic, provided the investor has avoided excessive leverage. In volatile conditions like these, a conservative approach is paramount.

Further insights and market commentary from Mikhail Makarov:

https://www.instaforthtex.com/ru/forex_analysis/?x=mmakarov

https://www.ifxtradepro.com/ru/forex_analysis/?x=mmakarov

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