Wall Street set for heavy losses, S&P 500 nears bear territory

The last time the S&P 500 confirmed it was in bear market territory was in June 2022 when investors were worried whether the Federal Reserve would be able to tame post-pandemic inflation without causing an economic downturn.

Wall Street's main indexes braced for steep losses at the open on Monday, with the S&P 500 near bear market territory, as investors sought refuge in government bonds on economic worries over the fallout of US President Donald Trump's sweeping tariff plans.

The 10-year US Treasury yields fell to 3.986 per cent, with investors pricing in a chance of a fifth interest-rate cut from the Federal Reserve this year.

Futures, however, pared losses slightly after White House economic adviser Kevin Hassett played down economic concerns over Trump's tariffs, saying the US president has talked to world leaders all weekend and will listen to proposals for "great deals".

S&P 500 E-minis were down 128.25 points, or 2.51 per cent, Nasdaq 100 E-minis were down 449.75 points, or 2.56 per cent, and Dow E-minis were down 892 points, or 2.32 per cent.

"What we're seeing is more of a technical bounce after a very steep selloff, but it's not necessarily the end of the selloff," said Fiona Cincotta, senior market analyst at City Index.

"For that to happen, we would need to see fundamental changes such as Trump walking back some trade tariffs or some sense that the global economy will perform okay regardless, or central banks stepping in to support economies."

S&P 500 futures are down more than 20 per cent from their peak, suggesting the benchmark index is heading toward bear market territory. If the index ends down 20 per cent from its all-time closing highs, it would confirm the index has been in a bear market since February.

Futures linked to the Dow also fell 20 per cent from their record high.

Trump announced hefty tariffs against US trading partners last week, sparking retaliation from China and fueling concerns that the trade war will impede economic growth and stoke inflationary pressures.

In the two sessions after Trump's tariff decision, the S&P 500 has tumbled 10.5 per cent, erasing nearly $5 trillion in market value, marking its most significant two-day loss since March 2020.

Trump told reporters late on Sunday that investors must endure the consequences and that he would refrain from negotiating with China until the US trade deficit is addressed.

Futures tracking the U.S. small-cap Russell 2000 index tumbled 3.3 per cent, underscoring concerns about the health of the domestic economy.

The CBOE Volatility index, seen as Wall Street's fear gauge, was at 48.89 points, its highest since August 2024.

Stocks fell across the board in premarket trade, with megacaps continuing to bear the brunt. Apple was down 2.7 per cent, Nvidia lost 4.8 per cent, while Amazon.com shed 2.1 per cent.

Howmet Aerospace dropped 5.2 per cent, after a report said the aircraft parts supplier may halt some shipments if they are impacted by Trump's tariffs.

The sharp declines in the past two sessions pushed the tech-heavy Nasdaq into bear market, while the Dow Jones Industrial Average slumped more than 10 per cent from its record-closing high.

The fear of a tariff-led recession caused markets to bring into play the chances of an interest-rate cut in May, with traders seeing a near 60 per cent possibility, according to data compiled by LSEG.

Several speeches by Fed officials and a series of economic indicators, including consumer price data, are slated throughout the week, with markets keenly observing any signals of recessionary fears