The US stock market saw a big drop overnight on March 10. Major indexes like the Nasdaq and S&P 500 fell by 4% and 2.7%, respectively, as worries about a major trade war and a slowing economy under President Donald Trump's trade policies scared investors.

Reuters reported that this sharp decline erased $4 trillion from the S&P 500's high in February. Technology stocks experienced their worst losses in a day since 2022. It wasn't only stocks that fell, corporate bonds, the US dollar, and cryptocurrencies also dropped significantly. As US bond prices fell, yields went up because investors were looking for safer assets amid a gloomy economic outlook.

Why did the stock market crash?

The US stock market crashed because investors were worried about PresidentTrump’s tariffs and their negative effects on the economy. These concerns about a potential trade war and a slowing economy made people nervous, leading to a sharp selloff.

Trump has introduced several new tariffs on countries like Canada, Mexico, China, and India. These trade restrictions have created uncertainty for businesses and investors, adding to market worries.

There are growing concerns that Trump's tariff policies and spending cuts could slow down the US economy and increase the risk of a recession.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, "Trump’s unpredictable tariff policies and the uncertainty they bring have started affecting US stock markets. The S&P 500 and Nasdaq dropped by 2.7% and 4%, respectively, as a reaction to these tariffs and the risk of a US recession by year-end. We will have to wait and see how things unfold."

Recent US economic data paints a mixed picture. The latest jobs report showed that 151,000 jobs were added in February, an improvement from January's 125,000 but far lower than the hiring seen in late 2024.

At the same time, hopes for more interest rate cuts by the US Federal Reserve have weakened. Fed Chair Jerome Powell signalled that the central bank is likely to keep rates steady for now, citing uncertainty due to Trump’s policies.

Impact Indian markets

The Indian stock market is likely to open lower on Tuesday, following weak global trends. Indian stocks have already been under pressure due to foreign investors pulling out money, concerns over slow economic growth, and weak earnings reports. Now, Trump's tariff policies have added to the uncertainty, which may lead to further capital outflows.

Experts suggest that investors should focus on domestic sectors like consumer goods, which are less affected by global trade issues. On the other hand, export-driven industries like IT and pharmaceuticals may see increased volatility.

"Investors can play it safe by focusing on domestic consumption themes, which will not be impacted by potential tariffs. Export-oriented segments like IT and pharma will be volatile as they react to US policy changes," said Vijayakumar.

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