Markets see more selling as recession fears grow

Dow plunged 890 (but above the very deep session lows), decliners over advancers better than 3-1 & NAZ tumbled 727.  The MLP index was off 1 & the REIT index fell 4+ to the 408s.  Junk bond funds remained weak & Treasuries were very heavily bought which sharply reduced yields.  Oil was lower, dropping 1+ to the 65s, & gold gave back 24, taking it to 2890 (more on both below).

Dow Jones Industrials

Pres Trump declined to explicitly rule out a full-blown recession for the US economy this year, saying that the country will see a "period of transition" as his policies take effect.  "I hate to predict things like that," he said of a recession. "There is a period of transition because what we're doing is very big. We're bringing wealth back to America. That's a big thing… it takes a little time, but I think it should be great for us."  His comments come amid some business leaders' instability concerns over tariffs imposed on China, Canada & Mexico, as well as growing concerns of a potential economic slowdown.  The Atlanta Federal Reserve has predicted a contraction of -2.8% in the first qtr.  Goldman Sachs raised the expectations of a recession within the next 12 months to 20%, while  JP Morgan says the probability of a recession stands at 35%.  Commerce Secretary Howard Lutnick offered a more definitive answer yesterday when asked about the possibility of a recession.  He said he would "never bet on" one.

Trump says US will experience 'period of transition' when asked if economy could see a recession this year

Nvidia (NVDA) has lost nearly a 3rd of its value just 2 months after notching a fresh high. The leading chipmaker slumped again today, building after last week's losses as heavy selling continued across the tech sector.  The popular artificial intelligence stock has shed about a 4th of its market cap since Pres Trump’s inauguration.  Tariff fears & growth concerns have rocked technology stocks,  including NVDA, over the past week, with the tech-heavy NAZ dropping more than 4% & is at a 6-month low.   Many technology companies rely on parts & manufacturing overseas & new levies could push up prices.  That has also sparked worries of a US recession, which Trump did not rule out over the weekend.  Tesla (TSLA) led the declines among the “Magnificent Seven” names, plummeting more than 13%.  The Elon Musk-backed electric vehicle company has plunged more than 20% over the past week & shed nearly ½ its value since Trump took office in Jan.  The stock is also coming off its longest weekly losing streak in history as a public company.  Today NVDA stock fell another 5.71 & TSLA stock plunged an eye popping 40.52.

Nvidia down 30% from high as tech-led sell-off hits ‘Magnificent Seven’

The Federal Reserve won't lower interest rates at its policy meeting next week, but could deliver the first of a set of rapid-fire reductions in borrowing costs in Jun if rising fears of an economic downturn triggered by a trade war materialize.  At least that's where the betting is in futures markets, where contracts that settle to the Fed's policy rate were increasingly priced for qtr-percentage-point reductions in Jun, Jul & Oct following Pres Trump's remarks last weekend about a "period of transition" as he ratchets up tariffs on China, Canada & Mexico.  US stocks & Treasury yields also dropped today on concern that his comments signaled a coming recession.  Fed Chair Jerome Powell on Fri said the central bank is in no rush to cut rates, with the labor market still strong, inflation on a bumpy path toward the central bank's 2% goal, & uncertainty high over the effect of Trump's trade, fiscal, immigration & regulatory policies.  Economists say those policies could drive prices higher & slow the economy at least in the near term.  Goldman Sachs economists just cut their US growth forecast to 1.7% & raised their inflation forecast.  Such a scenario could force the Fed to make a tough choice between keeping pressure on inflation by leaving its policy rate in the current 4.25%-4.50% range or cutting rates to cushion the labor market against deterioration.  While markets are betting on the latter approach, some economists see the Fed slow-walking rate cuts to keep tariff-inflated prices from stoking household & business inflation expectations, which could deepen the chance of persistently high actual inflation.

Fed to deliver rapid-fire rate cuts if economic downturn happens, traders bet

Gold eased as a slight rise in the $ dented safe-haven demand amid trade war concerns, while investors awaited inflation data this week for clues on the Federal Reserve's next interest rate decision.  Spot gold fell 0.2% to $2905 an ounce, while US gold futures were steady at $2911.  The dollar index pared losses slightly after hitting a more than 4-month low on Fri. The $'s ​​strength was weighing on bullion & could bring a further correction below $2900.  Meanwhile, the focus remains on trade tensions.  In his latest warning to Canada, Pres Trump said that tit-for-tat tariffs on dairy products & lumber could be imminent.  Data showed China's consumer price index, the top consumer of the metal, missed expectations in Feb & fell at the sharpest pace in 13 months, while producer price deflation persisted.

Gold Eases As Stronger Dollar Dampens Safe-Haven Demand

Oil prices held steady as concerns over the impact of US tariff uncertainty & rising output from OPEC+ producers weighed on prices while potential sanctions on Iranian oil exports provided some support.  Brent crude was up 9¢ at $70.45 a barrel while US West Texas Intermediate crude was at $67.19, up 15¢.  Last week marked WTI's 7th straight weekly loss, its longest losing streak since Nov 2023, while Brent fell for a 3rd straight week.  Pres Trump's protectionist policies have rattled markets around the world, imposing & then delaying tariffs on its biggest oil suppliers, Canada & Mexico, while also raising duties on Chinese goods.  China & Canada have responded with their own tariffs.  Investors see the uncertainty over US tariffs as a negative, but potential sanctions on Iran & Russia could provide support in the short term.  Looking at the bigger picture, the lingering uncertainty is likely to keep the oil rally short-lived.  Oil rebounded from a 6-month low on Fri after Trump said the US would increase sanctions on Russia if it fails to reach a ceasefire deal with Ukraine.  The US is also studying ways to ease sanctions on Russia's energy sector if Russia agrees to end its war with Ukraine.  Russian Deputy Prime Minister Alexander Novak said Fri that OPEC+ could reverse the decision if there was a market imbalance.  On the supply side, Trump is also seeking to halt Iran's oil exports as part of efforts to pressure the country to rein in its nuclear program.  Iran's Supreme Leader Ayatollah Ali Khamenei said on Sat that his country would not be bullied into negotiating.

Oil Prices Steady As Tariff Uncertainty Keeps Investors On Edge

Stocks plunged as investors processed growing concerns about the health of the US economy after Pres & his top economic officials acknowledged the possibility of a potential rough patch.  Political uncertainty is expected to persist into this week, with key economic data adding to the mix of potential market-moving factors.  Updates on the inflationary picture will be in focus, with the Feb Consumer Price Index scheduled for release on Wed & the Producer Price Index set to follow on Thurs.