The US stock market sell-off picked up pace on Monday after President Donald Trump declined to rule out the possibility of a recession while companies grapple with tariffs.
Markets have erased the large gains they made in the weeks after Mr Trump's election, and jubilation about his pro-growth and deregulatory promises has been replaced by a sense of gloom over the effects of tariffs.
The drop in stocks has been especially brutal for the so-called Magnificent Seven, which includes Google parent Alphabet, Amazon, Meta and Nvidia.
By market close on Monday, the tech-focused Nasdaq Composite Index had lost 4 per cent while the broad-based S&P 500 shed 2.7 per cent.
Tesla stocks took another bruising, falling about 15.4 per cent as a global backlash against Elon Musk's support of Mr Trump and far-right European political parties continues.
In an interview with Fox News, Mr Trump was asked if he expected a recession this year. “There is a period of transition, because what we're doing is very big – we're bringing wealth back to America,” he said. He added that “it takes a little time”.
The possibility of short-term pain stands in stark contrast to Mr Trump's usual upbeat messaging about the economy. During his first term, he repeatedly bragged about gains in the stock market but has been comparatively silent on the topic since taking office on January 20 this year.
Investors have been increasingly concerned about a possible downturn as Mr Trump drew up a list of tariffs on imports, hitting everyone from manufacturers reliant on goods from Canada and Mexico to producers affected by retaliatory levies.
“Market participants are losing faith in the notion that President Trump will forestall a market decline with a reversal in his policies if those policies are the basis for a material decline in stock prices,” said Patrick O'Hare of Briefing.com in a note.
Investors have been selling stocks for several weeks and consumer confidence is dwindling even before Mr Trump said the tariffs would be imposed.
Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut, cited concerns of tariffs and Mr Trump's interview as key factors behind Monday's risk-off mood.
“When he says there's going to be pain felt, he's telling you this may not be short term in nature,” Mr Pavlik told Reuters. "This may not be a negotiation tactic.
“Tariffs create a bunch of uncertainties around costs, inflation and economic growth. You don't know the end game and you don't know the goal. How do you plan for that? How do you buy a stock for the future when you don't know what the future holds?”
Investors are eyeing a consumer inflation report due in midweek for further signals on how the economy is faring. They will also be weighing up the possibility of a government shutdown as politicians seek to avert a closure by Friday.
A long-awaited US executive order on creating a strategic reserve of cryptocurrencies came on Friday, but disappointed many investors by saying there would be no additional buying of Bitcoin, which was trading at $79,400 on Monday, having fallen about 25 per cent since its peak in December.
