Markets Daily: Recession worry takes hold

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Markets Snapshot S&P 500 Futures 5,640 +0.34% Nasdaq 100 Futures 19,543 +0.46% US 10-Year Treasury Yield 4.215% +0.002 Bitcoin 81,722.31 +3.09% Market data as of 06:44 am EST. View or Create your Watchlist Market data may be delayed depending on provider agreements.

Five things you need to know

President Donald Trump is speaking with top business executives today, as industry leaders grapple with uncertainty about wide-ranging tariffs and a market selloff driven by recession fears.  US stock-index futures are signaling modest gains on Wall Street after yesterday's slump. Citigroup downgraded its view on US equities while upgrading China, a sign of the growing divergence in the outlook toward the world's top two markets. Elon Musk called entitlement spending — including Social Security and Medicare — a key target for cuts, arguing the programs are plagued by fraud. The billionaire's remarks about popular safety net programs could run into opposition in Congress.  Talks between the US and China on trade and other issues are stuck at lower levels, people familiar with the matter said, with both sides talking past each other and failing to agree on the best way to proceed. Delta Air Lines lowered profit expectations for the first quarter roughly by half on weakening travel demand, the latest sign that economic worries are pressuring consumer spending. The stock is slumping 10% in premarket trading.

Stocks sugar high to hangover

US stocks have gone from scaling record highs to flashing recession worries in a matter of weeks. What began as a mild decline in expensive tech stocks has morphed into a flight from all US stocks as investors worry Trump's trade war will stall the economy. The S&P 500 has slumped 9% from its February peak, while the Nasdaq 100 sank 12% into a technical correction. The Bloomberg Magnificent Seven Index — which comprises the biggest beneficiaries of the AI trade— has plunged 20% since a December high. "The market's post-election sugar high has turned into a bit of a nasty hangover as the policy realities of Trump 2.0 begin to become clear," Benny Adler, head of equity capital markets trading at Goldman Sachs, wrote in a note to clients. Hedge funds, asset managers and retail investors have all turned into sellers. Among the catalysts making markets shaky: The Federal Reserve has signaled it's slowing the pace of interest rate cuts and Chinese chat-bot startup DeepSeek raised questions about America's lead in AI. And with the Trump administration indicating that it's prepared to handle some distress in the economy, investor expectations of a "Trump put" — policy reversals that can halt a decline in the stock market — are quickly evaporating. "Unemotional sources" such as trend followers and volatility-control funds have contributed to the selloff as they reduced exposure. Short-term levels such as moving averages have also failed to support stocks, suggesting little demand to add risky assets. Some say that Trump isn't wholly to blame for the pullback. Parts of the economy were weakening when he took office, tech stocks have long been expensive and monetary policy remains tight. "Recent events have not been helpful for equity prices, but there are plenty of other things that have been going on," said Neil Dutta of Renaissance Macro Research. At the same time, yesterday's $1.1 trillion selloff in the Nasdaq 100 underscores how Trump's America First policies have, paradoxically, spurred a shift away from US assets. Investors are rushing into the relative safety of Chinese stocks, the euro, the yen, Australian government bonds and the offshore yuan: The euro has jumped about 7% from a February low while a gauge of Chinese stocks in Hong Kong is up 20% this year.  —Jan-Patrick Barnert and Sagarika Jaisinghani   Do tariffs matter more than the Fed for US stock markets in 2025? Share your views here in the latest MLIV Pulse survey.

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On the move

Oracle falls 2.3% in premarket trading. The software company reported disappointing quarterly results and gave a profit forecast that fell short of estimates. Delta's profit warning sent other airlines lower, with United falling 7.9%, American sliding 6.6%. In Europe, Air France-KLM shed 4.6% while Lufthansa was down 2%.  Asana slumps 28% after saying co-founder Dustin Moskovitz will retire as CEO. The company's revenue guidance also failed to meet analyst expectations. Vail Resorts gains 2.9% on earnings that beat estimates, helped by the company's season pass program. Kohl's and Dick's Sporting Goods report before the open today. Tesla is bouncing back, gaining 2.9% after yesterday's 15% plunge triggered by the broader market slump and worries about demand for its cars. Donald Trump said he'll buy a Tesla to support Elon Musk.  —Subrat Patnaik

Risky trades are being crushed

The selloff has been painful for tech stocks, but it pales in comparison to the walloping being doled out in the more speculative fringes of the market.  Take Reddit, the social-media company whose shares more than quadrupled last year. It tumbled 20% yesterday. Retail favorites like Tesla and Palantir both sank more than 10%. Strategy, which has turned into a proxy for Bitcoin, dropped 17% and Cathie Wood's ARK Innovation ETF declined 8.8%. From AI darlings to profitless technology companies, rising fears about a potential recession have sparked a flight from risk assets, hammering the momentum trade that just a few weeks ago was a money-printing machine for traders. "There's been a very big re-rating in growth expectations, and people are moving from risky low-quality stocks to high quality," said Kevin Caron, senior portfolio manager at Washington Crossing Advisors. "At this point I find it hard to see how you get a floor." —Jeran Wittenstein and Ryan Vlastelica

Playing European defense

The rally in European defense stocks has been so strong that they're now as richly valued as the region's high-flying luxury names.   Shares in German ammunition producer Rheinmetall have jumped almost 90% this year, pushing its price-earnings multiple to a record, somewhere between Dior owner LVMH and Birkin bag maker Hermès.  Other defense stocks including Thales and Leonardo have also soared. The test now is whether their earnings can match the headspinning stock surge. That intensifies the focus on Rheinmetall's results, due tomorrow. Bulls base their confidence on Germany's pledge to unlock hundreds of billions of euros for military spending and its push for EU leaders to follow suit. It's a shift that turns an historically low-growth corner of the stock market into one that has the potential to rapidly expand. "The growth outlook for these companies is very different today than it was six months ago," said Graeme Bencke of Amati Global Investors. "We need to expect that they look expensive right now because the market and the Street haven't really had a chance to upgrade earnings."—Isolde MacDonogh and Lisa Pham

Word from Wall Street "Markets right now are like Olympic-level tennis except we, traders, are the ball." Calvin Yeoh Portfolio manager, Blue Edge Advisors Click here to read more.

One number to start your day -45% The loss so far this year for two leveraged funds based on the Bitcoin holding company formerly known as MicroStrategy. Click here to read more.

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