The Nasdaq 100 index has continued its major decline as major fundamentals continue to weigh heavily on the index, now entering correction territory. The index is down10% from its all-time high.
Trump’s comments and policies, weak economic data and hawkish Fed despite weak economic data were the major drivers of the Nasdaq’s decline.
Trump Develops More Uncertainty
Trade-war uncertainty has persisted as investors weigh how far President Donald Trump would be to go further with US tariffs. President Trump announced 25% tariffs on Canada and Mexico and 20% tariffs on China, causing shockwave across global markets. The news triggered a major sell-off in stocks and escalated trade war fears.
On March 6, Trump said he would pause tariffs on some Mexican goods. The White House later said the delay also includes goods from Canada in order to begin negotiations on tariffs. ⁽¹⁾
Trump Doesn’t Rule out a Recession
In a recent interview with Fox News, President Trump refrained from dismissing the possibility of a US recession, attributing potential short-term disruptions to his administration’s extensive economic reforms aimed at long-term prosperity.
These reforms include new tariffs, immigration restrictions, and significant cuts to regulations, government jobs, and taxes. Treasury Secretary Scott Bessent anticipates an economic adjustment period due to reduced government spending. ⁽²⁾
Trump’s imposed tariffs have brought retaliation from China in the form of 15% tariffs on US imports. Trump also is considering imposing tariffs on EU imports, stoking further geopolitical tensions, only now with Europe. ⁽³⁾
The result of all of these things has been a bloodbath for US stocks, particularly the Nasdaq 100. Tech stocks are extremely sensitive to economic policy changes like the tariffs on China, where major tech companies rely on importing Chinese goods to produce their products.
What Does the Fed Have to Say?
Fed Chairman Jerome Powell stated on Friday that the US central bank is still waiting for insights on President Trump’s policy developments before they can determine their next decision on interest rates. ⁽⁴⁾
Powell stated that the White House is in the process of applying significant policy changes in trade, immigration, fiscal policy, and regulation and the net effect of these policy changes that will matter for the economy and for the path of monetary policy.
Powell also noted that uncertainty around the changes and their likely effects remains high. He added that the Fed is in no hurry to cut rates and is well positioned to wait for greater clarity. ⁽⁵⁾
Traders and investors are pricing in 3 rate cuts this year with a rate hold during the Fed’s next meeting on March 19. ⁽⁶⁾
US Data Disappoints
Nonfarm payrolls released on March 7 surprised to the downside, coming in at 151K instead of 160K expected. The unemployment rate ticked higher to 4.1% from 4% unexpectedly, despite a small decline in the participation rate.
The weak jobs data contributed additional bearish pressure on the Nasdaq 100. ⁽⁷⁾
US inflation has been rising for five months, placing the Fed in a difficult position as economic concerns emerge, and consumer inflation expectations increase.
The key concern is whether these expectations will drive inflation up or if poor economic data and lower oil prices will ease pressures. ⁽⁸⁾
Traders and investors are now focused on the upcoming inflation data, with CPI coming out on Wednesday, March 12. Forecasts point to a 2.9% increase yearly. PPI will also be released on Thursday with forecasts of a 0.3% increase month-on-month. ⁽⁹⁾
