Global market today: Nasdaq to S&P 500 — why did US stock market crash? Can it impact Indian stock market ? EXPLAINED

The US stock market witnessed a sharp selloff overnight on March 10, with major indices—the Nasdaq and S&P 500—plunging 4 per cent and 2.70 per cent, respectively, as concerns over a major trade war and economic slowdown in the world's largest economy due to President Donald Trump's trade policies spooked investors.

According to Reuters, Monday's sharp selloff wiped out $4 trillion from the S&P 500’s peak in February.

Technology stocks in the US suffered their biggest intraday losses since 2022. It wasn't just equities—several other asset classes, including corporate bonds, the US dollar and cryptocurrencies, also saw a significant selloff. US bond prices fell, driving yields higher as investors rushed to safe-haven assets amid a gloomy economic outlook.

Arindam Mandal, the head of global equities at Marcellus Investment Managers, underscored that while market volatility is expected during tariff uncertainty, the magnitude of the Atlanta Fed's 'GDPNow' estimates revision for Q1 GDP was a negative surprise.

Mandal pointed out that the equal-weighted S&P 500 is nearly flat year-to-date, outperforming the headline indices such as the S&P 500, which is down by around mid-single digits, and the Nasdaq, down by high single digits.

Why did the US stock market crash?

Concerns over Trump’s tariffs and their economic fallout are seen as the key drivers for the sharp selloff in the US stock market.

Trump has announced a volley of new tariffs against several countries, including Canada, Mexico and China as well as reciprocal tariffs against India. This has raised uncertainty for businesses and investors.

There are heightened fears that Trump's tariff policies and spending cuts could slow down the US economy and increase the risk of a recession.

"President Trump’s flip-flop tariff policy and the high uncertainty that it has triggered has started impacting US stock markets: S&P 500 & Nasdaq declining by 2.7 per cent and 4 per cent, respectively yesterday is the market’s response to Trump’s tariffs and the possibility of US recession by the year-end. We will have to wait and watch how the situation develops," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The recent US macroeconomic data has given mixed signals about the world's largest economy. The jobs report released last Friday showed employers added 1,51,000 jobs in February. This was up from January's revised 1,25,000 figure but half as many as in November and December.

The expectations of further rate cuts by the US Fed have also diminished. As Mint reported earlier, US Federal Reserve Chair Jerome Powell has said that the central bank will likely keep its benchmark interest rate unchanged in the coming months as it waits for widespread uncertainty stemming from Trump's policies.

Many experts point out the elevated valuations of US markets. They believe the US tech stocks were ripe for a deeper correction.

Amit Jain, the co-founder of Ashika Global, underscored he was extremely cautious on US stock market valuations as it the market was mispricing the Nasdaq 100 valuations compared to US treasury yield.

"When we were writing the Global Market Outlook on 1 January 2025, Nasdaq 100 was trading at an earning yield of 2.9 per cent as compared to the US G-Sec yield of 4.6 per cent. To us, it was insane, but somehow, global investors were unable to realise it at that moment in time," said Jain.

"It seems now that global investors are realising this mistake of mispricing the US tech sector above US treasury G-Sec yield. We feel, there is a further downside on US tech stocks event after such a steep correction of 11 per cent in the last one month," said Jain.

A confluence of factors—concerns over Trump's policies, the economic slowdown, waning expectations of US Fed rate cuts, and higher geopolitical uncertainty—are weighing on markets globally.

How can US stock market crash impact Indian stock market?

The Indian stock market is expected to see a negative start on Tuesday, tracking weak global cues.

The Indian stock market has already been under pressure due to heavy foreign capital outflow amid weak warnings and signs of economic slowdown. Trump's tariff policies have added to uncertainty about economic growth, which could further accelerate foreign capital outflow.

Experts advise investors to focus on domestic consumption themes as export-oriented segments such as IT and pharma could witness high volatility.

"Investors can play it safe by focusing on domestic consumption themes which will not be impacted by the potential tariffs. Export-oriented segments like IT and pharma will be volatile in responding to news flows surrounding US actions," said Vijayakumar.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.