US stocks tumble on ‘detox’ impact of Trump administration

• Nasdaq falls over 4%, Dow down 890 points as market sell-off intensifies
• Tesla plunges 15%, biggest Mag7 market cap loss on record
• US, China discuss a Trump-Xi summit for June
• Ukraine to propose limited ceasefire during talks with US in Saudi Arabia

FX: USD steadied in oversold territory, which is unsurprising after its recent collapse. The tariff impact and DOGE effect are hurting sentiment in US exceptionalism. Weekend words from the Administration about recession hasn’t helped sentiment. Policy instability is harming confidence and growth when stock market valuations were priced for near perfection. The main calendar risk is Wednesday’s US CPI, with US-Ukraine talks set for midweek.

EUR also steadied around a major Fib retracement level (61.8%) of the September – January decline at 1.0817. Short-term spreads between EZ and US interest rates have stabilised though the 10-year narrowed even further. That could push the euro higher in time, and through 1.09. Some consolidation above 1.08 would be healthy before another leg higher. That said, there has been some noise about the greens in Germany who may refuse to back new Chancellor Merz’s massive debt plans.  

GBP was relatively flat until late in the day, having benefitted hugely from the fiscal re-rating in Europe in recent days. Resistance sits at 1.2924, a major Fib level (61.8%) of the September to January decline. There is not a lot of UK data this week apart from GDP on Friday. EUR/GBP moved above the 200-day SMA that was resistance at 0.8383. January year-to-date highs are 0.8473.

USD/JPY pushed lower down through a major retracement level of the September/January rally (61.8%) at 146.94, before rebounding. The 10-year US Treasury yield slid, which typically goes the same say as the currency pair.

AUD fell in the last few hours of the US session. USD/CAD moved higher for a second day and above 1.44. Rate differentials have narrowed but remain in favour of USD ahead of the BoC rate decision. Another 25bps rate cut is expected.

US stocks: The S&P 500 lost 2.70% to settle at 5,614. The tech-laden Nasdaq finished down 3.81% at 19,430. The Dow fell 2.08% to close at 41,911. The benchmark, broad-based S&P 500 suffered the biggest one-day point and percentage drop since mid-December.  It is now down 8.6% from its record close in mid-February and is off 4.54% y-t-d. The Philly SOX index fell 4.85% with the FANG+ index sliding 4.75%. Tesla plunged a stunning 15.4% after a broker cut its price target amid concern about softer demand reducing delivery volumes.  Nvidia declined over 5% with Apple and Google falling 4.85% and 4.52% respectively. Markets are running scared of President Trump’s weekend comments that the US economy is undergoing “a period of transition”. Treasury yields fell as the VIX, Wall Street’s fear gauge jumped to 27, well above its long-term average below 20.

Asian stocks: Futures are negative. APAC stocks were mixed after softer than expected China inflation data and ongoing tariff issues. The ASX 200 saw outperformance in energy and materials but weak defensives. The Nikkei 225 just about reclaimed 37,000. The Hang Seng and Shanghai Composite sold off amid deflationary headwinds as CPI went negative for the first time in over a year. China’s retaliatory tariffs on agricultural products took effect.

Gold consolidated for most of the day before it fell for a third straight day just below $2900. Support sits at $2856 and resistance at the record top at $2956.

Day Ahead –Tensions take their toll

There’s JOLTS data to watch but the labour market in the US remains fairly solid when looking at Friday’s non-farm payrolls report. Some economists are concerned about the quality of jobs with nearly 90% of jobs added recently in lower paid, less secure and part time roles. Worries about DOGE are also expected to feed into the figures in the coming months.

Trump and his administration may take or be forced even, to regain the narrative about an incoming possible US recession, or rather, “a period of transition” due to tariffs. Added to all this uncertainty is US-Ukraine talks, which take place in Saudi Arabia this week. It is hoped they will be a lot more positive than last week’s Oval Office encounter between Trump and Zelenskyy.

Chart of the Day – Dow hits its 200-day SMA

While the tech-dominated Nasdaq and also broader S&P 500 have sunk well below their widely watched 200-day SMAs, the Dow continues to cling to its indicator. The index is more defensively minded sector wise but has succumbed to selling pressures seemingly every few days, going back to the start of last month. Prices closed marginally below the 200-day SMA at 41,922. November and January lows also reside near here forming a support zone with the halfway point of the August to December rally at 41,786. The next major Fib level of that move (61.8%) sits below at 41,010. Resistance above resides at 42,562.

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