Wall Street closed sharply lower on Monday, pulled down by tech and discretionary stocks. Concerns about a government shutdown and recession fear led to the broad-based selloff. All of the three most widely followed indexes closed the session in the red.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 2.1%, or 890.01 points, to close at 41,911.71. Twenty two components of the 30-stock index ended in negative territory, while eight ended in positive.

The tech-heavy Nasdaq Composite plunged 727.90 points, or 4%, to close at 17,468.32.

The S&P 500 declined 155.64 points, or 2.7%, to close at 5,614.56. Nine of the 11 broad sectors of the benchmark index closed in the red. The Technology Select Sector SPDR (XLK), the Consumer Discretionary Select Sector SPDR (XLY) and the Communication Services Select Sector SPDR (XLC) lost 4.3%, 3.6% and 2.5%, respectively, while the Utilities Select Sector SPDR (XLU) advanced 1.1%.

The fear-gauge CBOE Volatility Index (VIX) increased 19.2% to 27.86. A total of 18.77 billion shares were traded on Monday, higher than the last 20-session average of 16.42 billion. Decliners outnumbered advancers by a 3.64-to-1 ratio on the NYSE.

Trump’s Comments Lead to Stock Market Bloodbath

President Donald Trump has said that his administration is making very big moves and admits that there might be a “period of transition” or “disturbance.”  When asked about the likelihood of a recession during a television interview aired this weekend, Trump said, “I hate to predict things like that.” Concerns about an economic slowdown have dominated investor sentiments in recent weeks, and a broad-based stock market bloodbath was witnessed on Monday in response to Trump’s comments.

Layoffs have been growing in number, and inflation resurfaced last month, with consumer prices rising at their fastest pace since August 2023. Consumer confidence also took a significant hit in February. The Trump administration’s tariff policy has continued to stoke fear that inflation will shoot up in the United States as a result of reciprocal actions by trading partners. President Trump's refusal to rule out the possibility of the United States entering a recession later this year has only added fuel to that fear.

In such an environment, mega-cap growth stocks feel the heat because their current valuation is irrationally high compared to their future valuation. Tech and discretionary stocks felt maximum heat in the session.

Consequently, shares of Marvell Technology, Inc. (MRVL Quick QuoteMRVL - Free Report) and Microsoft Corporation (MSFT Quick QuoteMSFT - Free Report) slid 7.3% and 3.3%, respectively. Marvell currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Fears of a Possible Government Shutdown Weigh on Markets

Lawmakers have until March 14 to fund the United States government. However, it remains to be seen whether House Republicans will be able to get the support they'll need to pass the short-term funding bill.

The stopgap funding bill would maintain government operations at current funding levels through the end of the fiscal year. Failure to secure passage of the bill would, in turn, lead to a disastrous government shutdown.

Republican House speaker Mike Johnson said he plans to hold a procedural vote on Monday, bolstered by President Trump’s backing for the currently proposed bill. “All Republicans should vote (Please!) YES next week,” the President wrote on his social media platform of choice. There were jitters in the markets on Monday around the issue.

No economic data was released on Monday.