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By Lewis Krauskopf and Saqib Iqbal Ahmed
NEW YORK (Reuters) -Investor fears that trade tariffs will spark an economic downturn are driving a sell-off in equities that has wiped out trillions of dollars in value, a major reversal for Wall Street which had been fired-up by President Donald Trump's agenda.
A barrage of new Trump policies including back and forth tariff moves against major trading partners like Canada, Mexico and China has increased uncertainty for businesses, consumers and investors.
"We've seen clearly a big sentiment shift," said Ayako Yoshioka, senior investment strategist at Wealth Enhancement. "A lot of what has worked is not working now."
The recent selloff in stocks deepened on Monday, with the benchmark S&P 500 down about 2.5% in afternoon trade and the Nasdaq Composite sliding over 4%.
The S&P 500 on Monday was down more than 8% from its February 19 record high, shedding over $4 trillion in market value since then and nearing a 10% decline that would represent a correction for the index. The tech-heavy Nasdaq ended Thursday down more than 10% from its December high.
Trump over the weekend declined to predict whether the U.S. could face a recession amid stock market concerns about the impact of his tariff actions.
Beyond the tariff uncertainty, investors are watching to see if lawmakers can pass a funding bill to avert a partial federal government shutdown, while a crucial report on inflation looms on Wednesday.
"The Trump administration seems a little more accepting of the idea that they're OK with the market falling, and they're potentially even OK with a recession in order to exact their broader goals," said Ross Mayfield, investment strategist at Baird. "I think that's a big wake up call for Wall Street."
The S&P 500 tallied back-to-back gains of over 20% in 2023 and 2024, led by megacap technology and tech-related stocks such as Nvidia and Tesla that have struggled so far in 2025 and dragged major indexes down with them.
Those tech and megacap stocks that had propelled the market higher the past two years were getting hit hard on Monday. The S&P 500's technology sector dropped over 4%, while Apple fell nearly 6% and Tesla tumbled 14%.
Some defensive areas of the market were outperforming, with the utilities sector logging a gain on the day. Safe-haven U.S. government debt saw more demand on Monday, with benchmark 10-year Treasury yields, which move inversely to prices, down to about 4.22%.
INVESTOR UNEASE
The S&P 500 has given up all gains recorded since Trump's November 5 election, and it is down more than 2% in that time.