US equity indexes plunged with government bond yields in midday trading Monday as concerns mounted that the economy is heading for a recession and a gauge measuring inflationary expectations worsened.

The Nasdaq Composite sank 4.1% to 17,445.2, the S&P 500 slumped 2.7% to 5,615.9, and the Dow Jones Industrial Average was 1.9% lower at 41,995.3. The S&P 500 and the Nasdaq fell to the lowest respective levels since mid-September.

Communication services, technology, and consumer discretionary sectors led the decliners, while Energy was among the top gainers. The so-called Magnificent-7 group of stocks such as Tesla, Meta Platforms (META), Apple (APPL), and Nvidia were among the worst-performing 20 mega-cap stocks, which are firms with a market capitalization of more than $200 billion.

The CBOE's volatility index VIX, known as the fear gauge, soared 15% to 26.90 intraday.

President Donald Trump failed to rule out that the US economy could be entering a recession in 2025 while telling Fox News over the weekend that there will be a "period of transition because what we're doing is very big."

"The US administration's hint that the US may undergo a period of transition and 'detox' may be a mere fact, but is also a strategically placed message, with political undertones," Thierry Wizman, global forex and rates strategist at Macquarie, said in a note to clients Monday. "Strategic because it connotes a willingness to take the economy close to recession, which improves the administration's bargaining power with trade counterparties, the Fed, and the bond market."

Trump's comments were "political too, insofar as it signaled the need to get an economic adjustment concluded well before the mid-term elections," Wizman added.

Tariffs unsettled markets last week after he imposed a 25% levy on Mexico and Canada, sparking concern US prices would increase in response to punitive import duties. His administration later delayed some of the tariffs by a month, clouding the outlook for supply costs. Additional 10% import duties on China remained unchanged. The three countries are the US' largest trading partners.

In economic news Monday, median inflation expectations increased by 0.1 percentage point at the one-year horizon to 3.1% in February, according to the Federal Reserve Bank of New York. They were unchanged at the three-year and five-year horizons at 3%.

US Treasury yields dropped, with the 10-year diving 9.1 basis points to 4.23% and the two-year rate traded 7.7 basis points lower to 3.93%.

The US dollar depreciated 0.6% against the Japanese yen to 147.19.West Texas Intermediate crude oil futures retreated 1.2% to $66.23 a barrel. Gold futures fell 0.4% to $2,901.11, and their silver counterparts declined 1.1% to $32.45.

Portfolio News

Active Trading Portfolio: We will most likely trade EUR.USD and Crude Oil today. Just be aware that there are JOLTS data out from US at 1.30 ET which may have an impact on both. We will notify our premium and pro members via our whats app group. Check Out the Active Trading Portfolio.
Option Trading Portfolio: We're eyeing the EUR/USD and contemplating selling the 1.12 April Calls on the EUR/USD June futures! Yes, you heard that right! This isn't just a whim; it's a calculated strike. Want the inside scoop? A comprehensive breakdown awaits you in the Options Portfolio collection.

But that's not all! We're tapping into the power of high volatility, turning market turbulence into pure profit potential. We will be looking at option trades on SPY to capitalise on this volatility.
Check Out the Option Trading portfolio.
Buy and Hold Portfolio: Our long-term buy-and-hold portfolio has achieved a 5.55% year-to-date return, outperforming the broader market indexes (which are down 4.5%!). We are evaluating ten additional stocks for potential inclusion. Please refer to our Buy and Hold Portfolio for details. We will provide an update upon the completion of our stock selection. Check out out the Buy and Hold Portfolio.
The Vix: The VIX, often called the fear index, has been trending upwards, but we believe it has room to climb. We view a sharp VIX surge as a valuable contrarian indicator, often signaling a prime opportunity to buy into equities. We haven't yet seen the level of VIX volatility we're looking for, but we'll promptly inform our members upon its arrival. Until then, we recommend maintaining a patient approach.