U.S. stocks fell on Monday, getting off to a bad start to the week as concerns grew about tariffs and the future independence of the Federal Reserve. Meanwhile, the dollar continued to fall, U.S. Treasury yields rose and gold prices soared.
All major U.S. stock indexes closed lower on Monday, with the “sell U.S.” trade still in effect, amid growing concerns about President Donald Trump’s trade war and his unprecedented threat to remove Federal Reserve Chairman Jerome Powell.
The Dow Jones Industrial Average closed down 2.48%, the S&P 500 fell about 2.36% and the Nasdaq Composite fell 2.55%. Meanwhile, the dollar fell to a three-year low and gold soared to an all-time high. One of the top concerns for investors is the future independence of the Federal Reserve, as Trump once again slammed Powell on his social media platform Truth Social on Monday morning.
In the post, the president called Powell “Mr. Late, Big Loser” and called on the chairman to lower interest rates and falsely claimed there is “little to no inflation.” The Fed generally acts independently of the government, regardless of which party is in power. The Fed has been reluctant to cut interest rates this year amid concerns that the president’s tariff policies will lead to rising inflation.
Although Trump did not directly call for Powell to be fired on Monday, investors and Fed critics remain concerned that he might try to do so. On Friday, Kevin Hassett, director of the White House National Economic Council, said Trump is “looking into” whether Powell could be removed before his term ends next year. Krishna Guha, vice chairman of Evercore ISI, said on CNBC’s Squawk Box on Monday that firing Powell could lead to a larger sell-off in stocks and bonds.
“If you really try to remove the Fed chairman, I think the market will react strongly, with yields rising, the dollar falling, and stocks selling off,” Guha said. “I can’t believe that’s what the administration wants to achieve.”
As the dollar fell further on Monday, the global trend of “de-dollarization” became more obvious. In a more typical environment, the market would use the dollar as a safe haven asset to protect against other economic noise, and the dollar would also strengthen. But due to the Trump administration’s erratic actions, other countries are losing confidence in the United States and actively selling U.S. assets. The dollar has fallen more than 9% against a basket of other currencies so far this year.
U.S. Treasury yields also rose, with the 10-year Treasury yield rising more than 4.4%. Meanwhile, Bitcoin and other crypto assets surged earlier this week as a safe haven amid Trump’s attacks on the Federal Reserve. Gold prices have also surged to multiple new highs this year as investors seek safety.
Non-existent trade deal also worries investors
Economists and investors worry that if the government moves forward with the president’s proposed tariffs, it could lead to a recession. While Trump wants to reach deals with dozens of countries, including Japan and 74 others, no deal has been reached so far.
Trump has imposed a 145% import tariff on China. China’s Ministry of Commerce warned other countries on Monday not to reach a trade deal with the United States “at the expense of China’s interests.” China will “resolutely take reciprocal measures.”
Torsten Sløk of Apollo Global Management said there is a 90% chance of a recession in the United States in 2025.
He wrote this weekend: “Implementing extremely high tariffs overnight will hurt many businesses, especially small businesses, because they must pay tariffs when imported goods arrive in the United States. Expect ships to be stranded overseas, orders to be canceled, and well-run, established retailers to file for bankruptcy.”
This week, major company earnings reports, including those from Tesla, will be closely watched by Wall Street. Several companies, including Delta Air Lines and Walgreens, have withdrawn forward guidance.
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