United States major benchmark averages retreated on Monday (Tuesday AEDT) as renewed concerns over artificial intelligence disruption and President Donald Trump’s escalation of global tariffs rattled investor confidence.
The Dow Jones Industrial Average dropped 821.9 points or 1.7% to close at 48,804.1, the S&P 500 shed 71.8 points or 1% to 6,837.7, while the Nasdaq Composite declined 258.8 points or 1.1% to 22,627.3.
The 30-stock Dow was weighed down heavily by IBM, whose shares plunged 13.2% after artificial intelligence firm Anthropic unveiled new programming capabilities for its Claude Code product.
Broader software names remained under pressure. Microsoft fell 3.2%, while CrowdStrike slid 9.9% as investors reassessed earnings prospects in light of accelerating AI adoption.
Fears of structural disruption are now no longer confined to software, with trucking and logistics groups, commercial real estate operators and financial services firms also suffering losses this month.
Sentiment deteriorated further after Citrini Research published a weekend note arguing that the AI boom could ultimately weaken the broader economy, potentially driving unemployment to 10%. The report was widely cited on trading desks as a catalyst for renewed selling in both technology and financial stocks.
Within the Dow, American Express fell 7.2%, while Mastercard declined 5.8%.
Weather-related disruptions compounded the cautious mood. A powerful winter storm blanketed large parts of the United States with more than 15 inches of snow, paralysing travel across the Northeast. In the tri-state area, between 89% and 98% of flights were cancelled, according to FlightAware data.
Despite the broad-based weakness, select defensive and healthcare names outperformed. Eli Lilly lifted 4.4% after rival Novo Nordisk reported that its obesity treatment CagriSema underperformed Lilly’s Zepbound in a head-to-head trial.
Among individual movers, Domino's Pizza climbed 4.1% after fourth-quarter same-store sales exceeded Wall Street expectations.
PayPal advanced 5.8% following a Bloomberg News report that the payments group is attracting takeover interest.
Defensive consumer staples also provided relative stability. Shares in Walmart added 2.3%, and Procter & Gamble gained 2.7%.
Attention is also turning to the final stretch of fourth-quarter earnings season. High-profile results are due this week, most notably from AI chipmaker Nvidia, which is scheduled to report on Wednesday (Thursday AEDT). Home improvement retailers Home Depot and Lowe's are also set to release earnings, alongside Salesforce and Universal Health Services.
Tariff concerns add to volatility
Trade policy developments added a further layer of uncertainty. Trump reiterated on Monday that he retains the authority to raise tariffs, warning of higher duties on countries that attempt to “play games” after the Supreme Court struck down his reciprocal tariff regime last week.
Over the weekend, the president said he would lift the global tariff rate to 15%, up from the 10% announced previously, and indicated that the new duties would take effect immediately.
He also flagged additional levies in the coming months, though details of formal implementation remain unclear.
European officials voiced concern that the measures could jeopardise transatlantic trade arrangements. The European Parliament announced it had paused work on ratifying the trade agreement reached between the United States and the European Union.
On the bond markets, yields edged lower, with the 10-year Treasury yield down 1.4% to 4.029% and the two-year yield falling 1.3% to 3.438%, reflecting a cautious shift in investor positioning as volatility surrounding U.S. trade policy shows little sign of abating.
