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Stock market gains faded quickly after the open. The Nasdaq composite rose as much as 0.8% in early trading, but closed 2.6% lower. At one point, it was down more than 3%. The Nasdaq closed today slightly below its 200-day line. In a similar way, the S&P 500 bounced after testing support around the 5,830 level Friday. Yet, there was no follow-on buying after this morning’s opening gain. The index lost 1.8% today. Blame the market’s sudden weakness on tariffs. The market has rapidly changed direction in its trend just since February 19 when the SP 500 and the Nasdaq closed at new all-time highs. The recent spike in volatility and the fear, uncertainty and doubt caused by tariff talks and trade policies has triggered a confidence crisis. The graphic above shows a collapse in investor sentiment which is now in the “Extreme Fear” zone.
President Donald Trump’s tariffs against Canada and Mexico are set to take effect tomorrow. Speaking at the White House late Monday morning PT, Trump said there was “no room left” to negotiate with Canada and Mexico. He continued, saying, “They’re all set. They go into effect tomorrow.” Meanwhile, the White House said that Trump had signed an executive order raising the tariff on China to 20%.
The market’s reaction was disheartening action after Friday’s sign of resilience. Of the “Magnificent 7” stocks, the 2 most volatile since the recent Presidential election have been Nvidia and Tesla. Nvidia plunged nearly 9% today, taking out its February 3 low and closing at its lowest level since September 18. Shares are sharply below their 50- and 200-day moving averages after testing those levels last week. Tesla tumbled nearly 3%, erasing most of Friday’s gains and closing at the 200-day line. That’s Tesla stock’s last-ditch support level.
Beyond the most Mag of the Mag 7, today’s market action displayed excess volatility in many parts of the market. The crypto rally, which started with details on a U.S. crypto reserve from President Donald Trump also saw big price swings today, though hung on to some of the gains from the spike over the weekend. Volatility was also evident today with bond yields and energy. The 10-year U.S. Treasury yield ticked lower to 4.18%. Its is down from near 4.7% just two weeks ago. Oil prices dropped, as West Texas intermediate futures settled around $68.30 a barrel. It’s down almost 5% in 5 days.
Tariffs appear to be already impacting factory activity. The S&P Global U.S. Manufacturing PMI climbed to 52.7 in February. Although manufacturing production grew at the best rates since May 2022, and new orders increased at the best pace in a year, much of it was due to companies and customers building up inventories to beat price hikes and supply issues they expect from tariffs.
Again, investor nerves are showing up in market volatility. The graphic above clearly shows that. It is also reflected in a jumping VIX, the market’s “fear gauge”. Intraday today the Nasdaq volatility — the average spread between the daily highs and lows over a 10-day period — is at two percentage points, the highest spread since August 16, according to Dow Jones Market Data.
Wall Street is calling the sell-off in the likes of the “Mag 7” a “growth scare”. Whatever the correction unfolding now in mostly tech growth stocks is called, it is a reminder of the benefits of proven defensive portfolio management strategies and remaining diversified.
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