Stock market whipsaws in early trading as economists cite recession risks

Stocks in the U.S. swung sharply in early trade Monday, gyrating between losses and gains as investors sought to chart the Trump administration’s next move on tariffs. 

The S&P 500 fell 3.5% out of the gate, quickly erased those losses to briefly enter positive territory, only to swiftly fade. As of 10:43 a.m. EDT, the index was down 95 points, or 1.9%, to 4,980. The Dow Jones Industrial Average and Nasdaq Composite saw similar head-spinning volatility, and fell 2.3% and 0.6%, respectively. 

Investors have panned President Trump’s tariffs, saying they are likely to hit U.S. economic growth and drive up inflation. Goldman Sachs economists cited the barrage of levies on Monday in raising the odds of a recession to 45%.

“The combination of larger tariffs, greater policy uncertainty, declining business and consumer confidence, and messaging from the administration indicating greater willingness to tolerate near-term economic weakness in pursuit of its policies increase downside risk,” Goldman analysts said in a report.

Stocks plummeted last week after Mr. Trump on April 2 announced a 10% global duty on all U.S. imports and “reciprocal” tariffs on nearly 90 countries. The new trade measures sent markets into a tailspin, with the S&P 500 and Nasdaq recording their biggest two-day drop since March 2020. 

Overseas stock markets also suffered steep losses Monday, continuing their skid from last week. Hong Kong’s Hang Seng plunged 13.2% — its steepest drop since the 1997 Asian financial crisis, while Taiwan’s Taiex fell 9.7%, its heaviest loss on record. Tokyo’s Nikkei 225 index tumbled 7.8%, the Shanghai Composite index sank 7.3%, South Korea’s Kospi dropped 5.6% and Australia’s S&P/ASX 200 declined 4.2%.

In Europe, Germany’s DAX index was down 4.8% in midday trade. Paris’ CAC 40 also shed 5.1%, and Britain’s FTSE 100 lost 4.9%.

“The near-term future of equity prices depends heavily on Donald Trump’s whims,” Thomas Mathews, head of Asia Pacific markets at Capital Economics, said in a note to investors. “If he blinks in the face of market moves and/or decides he’s received enough concessions, he could lift some tariffs and sentiment might turn very quickly.”