The US stock markets plunged sharply on Monday, as investors reacted to a double whammy of trade policy chaos and escalating AI scare trade fears. The fear was fueled by a report from Citrini Research over the weekend which outlined rapid AI advancements that could trigger massive white-collar job losses, pushing unemployment above 10%, collapsing consumer spending, and even risking a mortgage crisis in the $13 trillion US housing market.
The fall was also fueled by Trump’s decision to up global tariffs to 15%, from the initial 10%, even after the Supreme Court struck down his sweeping “reciprocal” and emergency tariffs just a day prior. This reversal created fresh uncertainty around international trade and broader economic ripple effects.
The Dow Jones Industrial Average plunged more than 820 points, closing down approximately 1.7%. The broader S&P 500 fell about 1%, while the technology-focused Nasdaq Composite retreated around 1.1%. This pullback contrasted with the previous week’s gains, during which the Nasdaq had broken a streak of five consecutive weekly losses.
Adding to the pressure, there was a steep drop in IBM shares as well, which fell nearly 13.2% to close at $223.35. This was the biggest one-day drop since 2000.
Shares of DoorDash, American Express, KKR and Blackstone each fell by 6% or more. In fact, Uber, Mastercard, Visa, Capital One and Apollo Global Management all saw their shares slide by at least 4%.
But, what led to the fall in the US markets? Find out here:
IBM latest casualty with biggest one-day drop since 2000
IBM’s stock took a hit after Anthropic, the company behind the AI model Claude, said its new tool can make fixing old COBOL software a lot easier.
COBOL is a really old programming language, but it’s still used by banks, government offices, airlines and other big institutions. Many of these systems run on IBM’s mainframe computers. IBM earns a lot by maintaining these machines and helping companies slowly upgrade their old COBOL programs to newer systems.
Until now, updating COBOL has been a long and costly job. Teams of experts had to spend months going through the code line by line, figuring out how everything connects and where things could break.
Anthropic says its Claude Code tool can now handle most of that heavy lifting automatically. That could shrink projects that once took years down to just months, with much less manpower and lower costs.
Investors didn’t like that idea. If companies can modernise their systems quickly and cheaply with AI, they may not need as much help from IBM. That fear is probably what pushed the stock down.
This example adds to Anthropic’s push to shake up old software systems and the way companies upgrade their technology. The company says many digital projects are moving slowly because developers are getting less productive and businesses are stuck dealing with “technical debt”, reported CNBC.
Technical debt means problems caused by taking shortcuts while building software. Those quick fixes may save time at first, but later they create more work, higher costs and constant maintenance for companies.
Citrini Research fuels AI fear
Fears and concerns around how AI could affect the economy grew over the weekend after Citrini Research released a report warning that the AI surge might damage the wider economy and even push unemployment up to 10%.
The report explained how artificial intelligence could disrupt different parts of the global economy and put several industries at risk.
Traders on Wall Street pointed to this report as one reason software and financial stocks fell. American Express dropped 7%, pulling the Dow lower. Mastercard shares slid nearly 6%.
At the same time, safer parts of the market did better. Consumer staples stocks gained, with Walmart and Procter & Gamble both rising more than 2%.
Trump’s trade tariffs push investors on edge
Investors have been concerned about the potential disruptions after Trump’s decision to raise global tariffs to 15%. Trump said on Monday that he can still raise tariffs, even after the Supreme Court blocked his “reciprocal” tariff plan last week. He warned that countries trying to “play games” could face higher import taxes.
Over the weekend, he said that he plans to lift the global tariff rate to 15%, up from the 10% he announced earlier. He claimed the new rate would start right away, but it was not clear if any formal order had been signed. He also said more tariffs could be introduced in the coming months.
Leaders in Europe reacted with concern. They said the move could hurt trade ties with the United States. The European Parliament announced on Monday that it has paused work on approving the trade deal reached between the U.S. and the European Union.
The sheer uncertainty has put the investors on edge. Shares of companies like Wayfair and Nike, which had risen after the court ruling, fell on Monday.
Bitcoin dropped sharply, falling below $65,000. The cryptocurrency is now down more than 4% as the sell-off continues, reported CNBC.
This uncertainty around Trump’s tariff plans may continue for some time. He had used Section 122 of the Trade Act of 1974, which allows a US president to impose tariffs for up to 150 days before needing approval from Congress.