Investing.com - U.S. traded sharply lower on Monday as investors assessed the impact of President Donald Trump’s tariff plans and gauged his scathing remarks about Federal Reserve Chair Jerome Powell.
By 10:51 AM ET, the benchmark S&P 500 had dipped by 119 points, or 2.3%, the tech-heavy Nasdaq Composite had shed 437 points, or 2.7%, and the blue-chip Dow Jones Industrial Average had retreated by 851 points, or 2.2%.
The main averages on Wall Street were closed on Friday, while some markets, including much of Europe, were on holiday for Easter Monday, meaning liquidity was relatively thin.
"[I]t’s very likely April 2 was the high-water mark for tariffs, and we fully expect ongoing negotiations to yield ’deals’ that bring down the duty burden," analysts at Vital Knowledge said, referring to the date when Trump revealed his sweeping reciprocal tariffs on both friends and foes alike.
Trump officials have said they are aiming to sign dozens of agreements during the ongoing 90-day pause to the elevated duties on a host of nations, although experts have cast doubt over whether this will be achievable.
Meanwhile, White House economic adviser Kevin Hassett has suggested that Trump officials are studying if the president could fire Fed Chair Jerome Powell. Trump has revived threats to oust Powell from his role at the helm of the U.S. central bank, accusing him of moving to slowly to bring down interest rates.
In a post on his Truth social today, Trump again called on Powell to lower interest rates in a "preemptive" move, saying there is little to no inflation. "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," Trump said.
"Trump’s tariffs seem likely to fuel inflation and even if this rise is only ’transitory,’ markets will be on edge for the 6-12 months that the price adjustment takes place, with White House ire towards Powell steadily rising during that period," the Vital Knowledge analysts said.
Earnings deluge ahead
Against this backdrop, investors are gearing up for a bevy of corporate earnings reports this week.
Highlighting the slate of returns will be Google-parent Alphabet (NASDAQ: GOOGL ) and Elon Musk-helmed electric carmaker Tesla (NASDAQ: TSLA ), who will become the first of the so-called "Magnificent Seven" mega-cap tech names to unveil their latest results.
Traders will likely be keen to see if the figures and potential guidance provide some relief for markets still reeling from massive ructions sparked by Trump’s tariff policies. In recent years, the Magnificent Seven stocks have largely been the driving force behind U.S. equity market gains, although shares in these businesses have declined so far this year.
The VIX volatility index, a gauge of investor fears, has dipped to around 30 after cresting at roughly 60 during the market turmoil earlier this month. The long-term median level is at around 17.6, LSEG Datastream figures cited by Reuters showed.
Chipmaker Intel (NASDAQ: INTC ), drug manufacturer Merck (NSE: PROR ), tech firm IBM (NYSE: IBM ), and Pampers-parent Procter & Gamble (NYSE: PG ) are also on the earnings docket this week, as well as American Airlines (NASDAQ: AAL ). The carrier’s rival United Airlines last week provided a two-pronged outlook for the year, including one scenario forecasting a recession that sparks a deep hit to revenue and profit.
Elsewhere, shares in Netflix (NASDAQ: NFLX ) rose after executives at the streaming service suggested that they were confident that it could withstand the economic fallout from Trump’s tariffs.
Recent figures have pointed to deteriorating U.S. consumer sentiment and spiking inflation expectations, leading to some increased concerns that price-conscious customers may rein in nonessential spending, including on streaming subscriptions.
But, following better-than-expected quarterly results published after the close of U.S. trading last Thursday, Netflix co-CEO Greg Peters said the group has yet to see a significant change in consumer behavior.
Gold touches new record high
Gold prices hit a new record high on Monday, supported by fears over a tit-for-tat trade war between the U.S. and China as well as a weakening dollar against a basket of currency peers.
Spot gold had risen by 2.7% to $3,415.92 by 10:56 AM ET. Gold futures expiring in June also surged by 3% to $3,427.89.
Underpinning the jump in bullion was a slide in the U.S. dollar index to a three-year low, which can make the yellow metal less expensive for foreign buyers and drive up demand. Gold is also seen as a relative safe haven during times of economic uncertainty or market upheaval.
Meanwhile, oil prices dropped on indications that progress was being made in talks between the U.S. and Iran, which analysts say could boost supplies. Continued concerns that a tariff-fueled economic downturn could dent demand weighed on crude as well.
(Scott Kanowsky contributed to this report)