Nasdaq, S&P 500, and the Dow are crashing at market open again

The stock market is plunging again, as data from CNBC shows the Dow Jones Industrial Average dropped by 381 points, or 0.9%, while S&P 500 futures fell by 1.1%.

The Nasdaq took the hardest hit, sinking 1.4%. The latest sell-off comes as new U.S. tariffs on imports from Canada, Mexico, and China took effect this week, shaking the markets. In response, China and Canada hit back with retaliatory tariffs, while Mexico warned of countermeasures coming by the weekend.

Wall Street is getting slammed with uncertainty. Stocks have already lost over 1% this week, and investors are dumping riskier assets fast. While the White House announced a one-month delay on some auto tariffs Wednesday, it wasn’t enough to calm fears. Traders had hoped for broader exemptions, but skepticism is growing.

Nasdaq composite | Source: CNBC

The Russell 2000 index, which tracks small-cap stocks, has dropped 9.4% from its January high. Goldman Sachs and other major banks are getting hit, while consumer staples like Procter & Gamble are drawing more interest.

Jobs data isn’t helping either. According to ADP’s latest payroll report, private companies added only 77,000 jobs in February, far below the 148,000 estimate from Dow Jones. This is also down from January’s revised 186,000, marking the weakest job growth since July.

The trade, transportation, and utility sectors combined lost 33,000 jobs in February. The numbers are fueling concerns about stagflation—a combination of rising prices and slowing growth that could hit the economy hard. Wall Street is already worried that Trump’s tariff policies could choke economic growth.

Trump’s “America First” trade bets are backfiring

When Trump rang the opening bell at the New York Stock Exchange in December, investors cheered his economic vision. The idea was simple: America would win the trade war while competitors would struggle. That bet isn’t paying off.

Instead of crushing global rivals, U.S. stocks are struggling while Europe is outperforming. The S&P 500 has risen 6% in six months, matching the FTSE 100 in the UK. But it’s far behind France’s CAC 40 (+9%) and Germany’s DAX (+20%). The Stoxx Europe 600 is up 8%.

A massive German stimulus package has driven the euro to its highest level against the dollar since November. The weaker dollar is pushing investors toward Europe, where stock valuations are looking stronger.

Stock heat map | Source: Tradingview

“We have gone from ‘all roads lead to the U.S.’ to seeing numerous cracks in U.S. exceptionalism,” said Alain Bokobza, Société Générale’s head of global asset allocation. Traders are moving their money elsewhere.

Defense stocks in Germany are booming. Rheinmetall’s stock has surged 130% in six months. Siemens Energy is up 115% as infrastructure spending ramps up. Meanwhile, Tesla—one of the biggest stock market winners after Trump’s election—has lost nearly all of its post-election gains.

Fund managers are now calling this a “Make Europe Great Again” trade, with investors pouring money into European stocks at the fastest pace in three years, according to Goldman Sachs. Vincent Mortier, chief investment officer at Amundi, said, “We have seen a kind of Mega replacing Maga.”

U.S. stocks are slipping as investors rethink tech bets

Despite strong earnings reports, U.S. stocks are struggling to keep up. Economic data isn’t looking good, and the tech sector, once the heart of Wall Street’s rally, is starting to look less attractive.

The market is questioning the AI boom and whether tech stocks can keep delivering the massive profits investors expected. Instead of buying more, investors are now using tech stocks as a “source of funds”, selling shares in major U.S. companies to buy into Europe and emerging markets.

“Ironically, in a year where everyone said America First, other markets, including emerging markets and Europe, might outperform,” said David Hauner, global head of emerging markets and FX strategy at BofA.

The bond market is telling the same story. Traders now expect at least two interest rate cuts from the Federal Reserve this year, with a strong chance of a third. At the start of the year, only one or two were expected.

Meanwhile, the 10-year Treasury yield has fallen from 4.8% in January to below 4.3%. Over in Europe, German Bund yields have jumped to 2.8%, their highest level since 2023. Investors are betting on stronger European growth, reversing the trend from earlier in the decade when all the money was flowing into the U.S.

Fund managers say Wall Street got Trump’s first term wrong

Some fund managers believe the market misread Trump’s impact from the beginning. Instead of focusing on short-term tax cuts and deregulation, investors should have paid attention to the long-term effects of tariffs and economic slowdowns.

“The good news of lower taxes and deregulation was factored in quickly,” said Trevor Greetham, head of multi-asset at Royal London Asset Management. “But it was hard to factor in the bad news—tariffs, deportations, and growth slowdowns—before they actually started happening.”

Meanwhile, European investors are getting more optimistic. Policymakers are pushing massive stimulus measures that could finally narrow the performance gap with the U.S.

“Europe is at its best in a crisis,” said Karen Ward, JPMorgan Asset Management’s chief market strategist for EMEA. She believes investors had underestimated Europe’s ability to adapt.

“The penny has dropped in Europe that the world has changed,” Ward added. “And if we do not galvanize and move together, we are going to have all sorts of problems.”

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