Stocks Slide as Tariff Uncertainty and AI Disruption Fears Trigger Broad Risk-Off Selloff

After managing to finish higher late last week despite bouts of volatility, the market reversed sharply Monday, with major averages posting decisive losses. The S&P 500 fell 1.0%, the Nasdaq Composite declined 1.1%, and the Dow Jones Industrial Average dropped 1.7%. The S&P 500 also slipped back below its 50-day moving average and returned to negative territory for the year, underscoring the deterioration in momentum.

Selling pressure was widespread. The Russell 2000 plunged 1.6% and the S&P MidCap 400 slid 1.8%, highlighting a clear risk-off posture across equities.

Trade tensions dominated the morning headlines after President Trump raised the Section 122 global tariff rate to 15% and warned of further tariffs against countries seeking to renegotiate trade agreements. The move came shortly after reports that the European Union is pausing approval of a trade deal with the United States. Additional uncertainty surfaced late in the day when reports indicated Congress may lack sufficient votes to extend the tariffs beyond their 150-day window.

Consumer discretionary stocks bore the brunt of the trade anxiety, particularly companies dependent on overseas manufacturing and imports. Retailers such as Williams-Sonoma, lululemon athletica, and Nike posted notable losses, while travel- and leisure-related names including Expedia Group and MGM Resorts fell even more sharply. Mega-cap exposure added further pressure, with Tesla and Amazon also declining.

Technology shares continued to struggle, particularly in software. Microsoft was a major drag among mega-caps as concerns mounted that artificial intelligence could disrupt traditional enterprise software models. Cloud and cybersecurity firms such as Datadog and CrowdStrike posted steep declines, while IBM plunged on reports that AI tools can automate legacy COBOL modernization work.

Weakness spread into alternative asset managers exposed to software holdings. Firms including KKR and Ares Management moved sharply lower amid uncertainty around portfolio valuations and exit prospects. Payment companies also came under pressure as fears grew that AI-driven disruptions could dampen high-income consumer spending, dragging down American Express and Capital One.

Industrial names tied to logistics and data services were not spared. Companies such as C.H. Robinson and Equifax declined as investors reassessed growth prospects in an AI-disrupted environment.

Amid the broad selloff, defensive sectors attracted rotation. Consumer staples, health care, and utilities all posted gains. Walmart rebounded after recent weakness, while Eli Lilly surged following disappointing results from rival Novo Nordisk related to a new weight-loss drug.

Outside equities, Bitcoin fell below the $65,000 level, reinforcing the risk-averse tone across markets.

Overall, the session highlighted persistent fragility beneath the surface. Renewed pressure on mega-cap technology and software—combined with trade uncertainty and limited leadership from AI infrastructure names—suggests last week’s rebound may have been more technical than fundamental. Until new leadership emerges, the major averages could remain trapped in a volatile consolidation phase.

Our FTinvest 11 model portfolio declined 0.25% to close at 1,015.32, continuing its gradual consolidation phase following the recent all-time high of 1,039.51. The portfolio remains firmly above the 1,000 milestone, though short-term momentum has softened in recent sessions.

Year-to-date, FTinvest 11 is still up +9.39%, reflecting a strong start to 2026 despite the recent pullback. The portfolio’s value-driven approach continues to provide structural resilience as markets transition from breakout momentum to a more measured trading environment.