The US stock market faced a sharp downturn on Thursday, March 6, 2025, as investors reacted to heightened trade tensions and disappointing earnings from major technology firms. The sell-off erased over $1.1 trillion in market value, sending key indices tumbling.
The Dow Jones Industrial Average fell by 427.51 points (1%), closing at 42,579.08, while the S&P 500 suffered a 1.8% decline, settling at 5,738.52. The most dramatic losses were seen in the Nasdaq Composite, which plunged 2.6% to 18,069.26, marking a 10.4% decline from its December peak, officially entering correction territory.
This widespread sell-off was fueled by mounting concerns over economic instability, led by President Donald Trump’s tariff policies and a weakening technology sector. Investors sought safety in bonds, with the 10-year Treasury yield dropping to 4.2%, signaling a shift away from riskier assets.
US Trade Uncertainty Sparks Market Jitters
President Trump’s latest trade policies played a significant role in the market downturn. On Wednesday, he announced new tariffs on select imports, followed by temporary exemptions for some goods from Canada and Mexico. However, this back-and-forth approach only deepened market uncertainty.
Despite Trump’s decision to delay some tariffs, investors remained skeptical about the broader implications of his trade strategy. Market analysts warned that ongoing tariff disputes could disrupt global supply chains, drive up inflation, and slow economic growth.
“These exemptions don’t resolve the broader uncertainty,” said Yung-Yu Ma, Chief Investment Officer at BMO Wealth Management. “Businesses are hesitant to make long-term investments under such unpredictable conditions.”
Concerns about a full-blown trade war also weighed heavily on corporate earnings projections, particularly for companies reliant on international trade.
US Tech Stocks Lead the Decline
The technology sector, which had been a driving force behind the market’s previous gains, saw steep declines as investors reacted to disappointing earnings and weak outlooks.
Marvell Technology suffered a staggering 19.8% drop despite reporting better-than-expected earnings. The company’s cautious outlook for the next quarter spooked investors, who had grown accustomed to tech firms exceeding expectations.
Other major semiconductor companies also took a hit:
Nvidia fell 5.7%
Broadcom dropped 6.3%
The broader concern in the technology sector is that the rapid rise of artificial intelligence (AI) stocks over the past two years has led to inflated valuations. Investors are now reassessing whether these companies can sustain their explosive growth, especially as Chinese competitors emerge as strong challengers in the AI space.
US stock market: Recession Fears Intensify as US GDP Forecast Drops
Investor sentiment was further shaken by growing fears of an economic slowdown. The Atlanta Federal Reserve’s GDP Now Tracker revised its first-quarter real GDP estimate to negative 2.4%, raising concerns that the U.S. economy could be sliding toward a recession.
The bond market reflected these fears, with 10-year Treasury yields falling from 4.8% in early January to 4.2% as investors sought safer assets. Historically, such a move signals expectations of interest rate cuts by the Federal Reserve in response to economic weakness.
The latest downturn has also erased all stock market gains since Trump’s November re-election, putting additional pressure on the administration to stabilize investor confidence.
US stock market: Looking Ahead: Key Economic Reports Awaited
With the US stock market on edge, all eyes are now on the upcoming U.S. jobs report, set to be released on Friday. A strong labor market has been one of the key buffers against a recession, but any sign of weakness in employment data could exacerbate market concerns.
Retailers have also been sounding the alarm about slowing consumer spending. Macy’s reported slightly weaker-than-expected revenue for the final quarter of 2024, while Victoria’s Secret issued a cautious forecast for 2025, leading to an 8.2% drop in its stock price.
As global markets react to the turmoil, European and Asian markets showed mixed responses. German stocks rallied 1.5% after a new government agreement, while Hong Kong and Shanghai indices posted gains despite US stock market troubles.
With trade uncertainty, tech volatility, and economic slowdown fears all converging, the US stock market faces a crucial test in the days ahead. Investors will be closely watching whether the US Federal Reserve steps in with potential rate cuts or if new trade policies bring much-needed clarity.
