Nasdaq, S&P, Dow Jones down for 2nd straight day: Why are the markets falling?

Stock markets in the US, which usually dictate how global markets perform, have been recording declines continously since Friday, March 7.

On Tuesday, Nasdaq closed 0.18% lower at 17,436.10 while S&P 500 ended 0.76% down at 5,572.07 and Dow Jones Industrial Avergae dipped 1.14% to 41.433.48.

In terms of continous dips, the tech-heavy Nasdaq has fallen 4.17% or 760 points since Friday, March 7. S&P 500 has dipped 3.43% or 198 points and Dow Jones Industrial Average has fallen 3.19% or 1,368 points in the same period.

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Why are US markets falling?

Donald Trump’s tariff policies

Global markets are facing rising uncertainties over US President Donald Trump’s tariffs policies, which have begun tariff wars with multiple countries. One of his most aggressive tariff impositions yet were announced on Tuesday – a 50% tariff on steel and aluminium imports from Canada.

Trump’s tariffs extend to Mexico and China too. What is adding to the uncertainty is Trump often withdrawing his decision to impose tariffs shortly after imposing them, owing the decisions to negotiations and discussions.

“A key factor behind the recent market selloff is the uncertainty surrounding trade tariffs and their economic implications,” Adam Turnquist, Chief Technical Strategist for LPL Financial, told Livemint.

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Recession fears in the US

Trump’s tariff policies have raised fears that they may push the world’s largest economy into a recession.

According to a Barrons report, due to the to the impact of tariffs on the economy, Goldman Sachs Chief Economist Jan Hatzius cut his 2025 US GDP growth forecast to 1.7 per cent against a 2.4 per cent growth projection at the start of this year.

Potential of higher inflation

The tariff policies adopted by the Trump administration may push inflation higher in the country as products entering the country either start getting costlier or stop getting imported altogether. Both the situations will be direct results of higher tariffs imposed by US on products it is importing.

Experts say a rise in inflation could limit the Fed’s ability to cut interest rates aggressively, narrowing its policy options.

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Investors saving themselves from risks

Market experts have pointed out that a risky market is leading to investors moving to less risky US bonds. Investors are rushing to buy bonds as the benchmark US 10-year treasury yield has fallen nearly 60 basis points since mid-January amid recession risks.

When investors buy more US Treasuries, their prices rise, and since bond yields move inversely to prices, the yield falls.