The stock market opened down on Monday morning and has continued to slide. The Nasdaq dropped more than 2% at opening and has since reached over 3.25%, while the dollar hit its lowest value against foreign currencies in years.
By noon, the Dow Jones Industrial Average was down 1,100 points, and the S&P 500 dropped nearly 3%. Big Tech shares, such as Tesla, Nvidia, and Salesforce, saw losses of about 6.8%, 5.5%, and 5.6%, respectively. The U.S. Dollar Index has fallen about 1.41% over the past week and hit a low of $97.99 on Monday, the lowest since February 2022.
Gold, bitcoin, and Treasury yields all rose during the market uncertainty.
The drop coincided with tariff worries and President Donald Trump slamming Federal Reserve Chairman Jerome Powell again.
Trump said last week that “Powell’s termination cannot come fast enough!”
“With Energy Costs way down, food prices (including Biden’s egg disaster!) substantially lower, and most other ‘things’ trending down, there is virtually No Inflation,” he said in a post on Truth Social.
“With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” he added. “Europe has already ‘lowered’ seven times. Powell has always been ‘To Late,’ except when it came to the Election period when he lowered in order to help Sleepy Joe Biden, later Kamala, get elected. How did that work out?”
National Economic Council Director Kevin Hassett said on Friday that Trump and his team are studying ways to fire Powell. He suggested that Powell has acted politically with his control over interest rates. “The policy of this Federal Reserve was to raise rates the minute President Trump was elected last time, to say that the supply-side tax cuts that were going to be inflationary,” Hassett said.
Investors are dealing “with a fresh source of macro anxiety: Trump’s threats to Fed independence,” Adam Crisafulli of Vital Knowledge told CNBC. “This threat is related to Trump’s trade war as Powell and his colleagues are forced to stay on the sidelines due to the prospect of a tariff-induced inflation spike over the coming months despite recent market volatility and rising downside growth risks.”
“The concurrent slump in stocks, the USD, and Treasuries suggests Trump’s trade war has set in motion an exodus from American financial assets that no amount of negotiating can reverse,” Crisafulli wrote.
An ouster of Powell would likely cause a panic in the stock market or, at the very least, volatility. Trump would likely install an administration-friendly Fed chairperson if he managed to fire Powell, who leads a politically independent agency.
WHICH ITEMS WOULD BE AFFECTED BY TRUMP’S PROPOSED TARIFFS ON CANADA AND MEXICO
Negotiations with several countries regarding Trump’s sweeping tariffs are ongoing.
The United States still has a fractured relationship with China, on which it has imposed the largest tariffs, as it warned countries not to make deals to their detriment on Monday.