ORLANDO, Florida, Feb 23 - U.S. stock markets fell sharply on Monday as fresh global tariff uncertainty combined with software-related concerns to pressure risk assets and push investors toward traditional safe havens such as gold, U.S. Treasuries and the Swiss franc.
Investors absorbed a sharp policy shock when a U.S. court ruling invalidated most duties, and the president responded by imposing a temporary 15% global tariff. The rapid reversal has left markets grappling with immediate questions about budget receipts, the legal process for refunds, the future of trade arrangements, the potential impact on upcoming midterm political dynamics, inflationary effects and how asset prices might react - questions for which there is no clear answer at present.
Market participants also contended with renewed anxiety centered on the software sector and private credit markets. A string of developments has heightened concern over lenders' exposure to struggling software companies, liquidity in closed-end funds and the broader resilience of alternative credit providers.
Recommended reading if you have more time
If you want additional context on today’s moves, here are a few articles that provide deeper angles on the market dynamics:
- U.S. tariff turmoil leaves Treasury markets dazed
- With U.S. tariff rates up in the air, the economic fog again thickens
- Winners and losers from Trump’s new 15% global tariff
- Software companies face higher borrowing costs, tougher scrutiny as AI threatens businesses
- Fed’s Waller: January jobs data an upside surprise, if it continues a policy pause may be appropriate
Key market moves on the day
- Stocks: Major U.S. indices closed lower. Outside the U.S., South Korea and the MSCI Asia ex-Japan index hit new highs. Hong Kong rose 2.5%, while mainland China fell 1.3%.
- Sectors/shares: Surprisingly, six S&P 500 sectors advanced, led by healthcare and consumer staples, but the other five sectors declined by at least 1%. Financials dropped 3%, their largest one-day fall since April. Notable stock moves included IBM down 13% and KKR down 9%.
- FX: The Mexican peso was the largest loser among major currencies, off 1%. The Norwegian crown fell 0.5%. The strongest G10 performers were traditional safe-haven currencies - the Swiss franc and the Japanese yen. The U.S. dollar slipped and bitcoin fell about 5% to trade below $64,000.
- Bonds: Treasuries rallied, driving yields down by as much as 7 basis points across the belly of the curve.
- Commodities/metals: Oil climbed to a six-month high before finishing the day off its highs. Gold reached a three-week high above $5,200/oz and silver gained 5%.
Today’s talking points
Tariffed and confused - The swift legal and policy developments have produced fresh uncertainty. With the court finding most duties unlawful and the administration enacting a temporary 15% global levy in response, investors are left to weigh an array of open questions about fiscal effects, pending claims for refunds, the status of current and negotiated trade agreements, the potential political ramifications for midterm contests, near-term inflationary pressures and implications for asset valuations. In this environment of heightened ambiguity, market participants tended to reduce risk exposure.
Private credit fears - justified or not? - Concerns spread through the opaque private credit arena as market participants focused on lenders’ exposure to the weakened software sector, broader liquidity concerns and a recent halt to redemptions at one of Blue Owl’s funds. Blue Owl shares fell another 3% on Monday, leaving the firm down almost a quarter of its market value so far this month. Other large private credit firms also weakened: Apollo and KKR shares slipped 5% and 9% respectively on Monday. UBS analysts estimate that, in a worst-case scenario, private credit defaults could rise 8% over the next year.
U.S.-rest-of-world divergence widens - The technology and software sell-off has deepened, with the sector off 25% for the year and having given back nearly all of its post-'Liberation Day' gains from April. The S&P 500 dipped back into negative territory for the year on Monday. The Nasdaq is down 3% year-to-date, while the Dow remains up 1.5% YTD. By contrast, several overseas benchmarks are notably stronger year-to-date: Europe’s STOXX 600 is up 6%, Britain’s FTSE 100 is up 8%, and Japan’s Nikkei is up 12%. Regional chipmakers have advanced sharply - Taiwan and South Korea equities are up 16% and 38%, respectively.
What could move markets next
- European Central Bank board members Pedro Machado and Anneli Tuominen are due to speak at separate events.
- U.S. house prices for December will be released.
- The U.S. Treasury will sell $69 billion of two-year notes at auction.
- Several U.S. Federal Reserve officials are scheduled to speak, including Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Boston Fed President Susan Collins, Richmond Fed President Thomas Barkin, and Governors Lisa Cook and Christopher Waller.
- U.S. President Donald Trump will deliver the State of the Union address after U.S. markets close.
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Opinions expressed are those of the author and reflect her interpretation of market developments.