On March 3, the three major U.S. stock indexes fell sharply.

The Dow Jones Industrial Average plunged 649 points in a single day, the S & P 500 Index and the Nasdaq Composite Index plunged 1.76% and 2.64% respectively. The three major stock indexes simultaneously lost key technical positions, and the market panic index VIX soared to a new high for the year above 24.This "black opening" of the capital market not only set the worst start in March since 2009, but also evaporated the market value of the S & P 500 components by more than US$1.5 trillion in a single day. The collective collapse of the "seven giants" of technology was particularly tragic. -Nvidia's market value shrank by nearly US$300 billion in a single day, and the trend of a drop of nearly 9% in a single day sent its share price back to the low of two months ago. The overall market value of the semiconductor sector shrank by 21% from the high of the year.The causes of this storm are not only the tariff stick waved by the Trump administration, the unexpected weakness in manufacturing data, but also the market's collective fear of economic stagnation.

The trigger for this sell-off was ignited at 9 a.m. Eastern Time on March 3.Trump confirmed at a White House press conference that he would impose a 25% tariff on imports from Mexico and Canada the next day, and that there was "no room for negotiation."This policy continues the protectionist line it has had since taking office in January, but this time it involves core commodities with an annual trade volume of more than US$1.2 trillion among the United States, Canada and Mexico, which directly impacts the North American supply chain system.Analysts at Goldman Sachs estimate that the new tariffs may push up the U.S. core inflation rate by 0.8 percentage points and increase the production costs of manufacturing companies by 5%-7%.What makes the market even more uneasy is that Trump simultaneously announced that he would launch a "reciprocal tariff" mechanism on April 2, implying that export controls may be implemented on strategic materials such as agricultural products. The cumulative effect of this two-way trade barrier has plunged corporate cost control into fog.

When policy shocks encountered a collective "explosion" of economic data, market panic found a vent.The American Institute for Supply Management (ISM)'s manufacturing PMI for February fell from 50.9 to 50.3 on the same day, barely standing above the boom-bust line, but the new orders index plunged 6.5 points to a contraction range of 48.6, setting the largest month-on-month decline since October 2024.In the sub-data, the raw material payment price index soared to 62.4, the highest level since June 2022, indicating that imported inflationary pressures are accelerating.This combination of "stagnant growth + rising prices" just confirms the forecast of the Atlanta Fed's GDPNow model, which further lowered the U.S. GDP growth forecast for the first quarter from-1.5% to-2.8%. If it is finally confirmed, it will be the most serious economic contraction since the early days of the epidemic in 2020.

Behind the capital market's voting with their feet is the repricing of stagflation risks by institutional investors.The bond market has long issued warning signals: the yield on 10-year U.S. bonds fell below 4.17%, and the yield on 30-year bonds fell below the 4.5% mark. The entire yield curve has been inverted to the highest level since 1978.Data from the interest rate futures market showed that traders 'expectations for the Fed's rate cut during the year have risen to 71.2 basis points from 50 basis points at the beginning of the year, equivalent to three standard 25 basis point rate cuts.This expectation is in sharp deviation from the "two interest rate cuts" shown in the Federal Reserve's December dot chart, reflecting major differences in the judgments of the market and policymakers on the economic outlook.Larry McDonald, a former Lehman Brothers trader, warned that the United States is facing a "1968-1981-style stagflation cycle" and that even if the economy falls into recession, interest rates will remain high. This environment will force corporate profits to continue to be under pressure.

The collapse of technology stocks has become the most eye-catching footnote to this crisis.The Philadelphia Semiconductor Index plunged 8.7% in a single day, and the market value of industry chain leaders such as TSMC and Nvidia evaporated by more than US$400 billion.This debacle stems from the impact of tariff policies on global supply chains. Although TSMC announced an additional US$100 billion in investment in the United States, rumors of its bill cuts still raise questions about the sustainability of AI computing power demand; It also reflects the market's re-examination of the valuation system of technology stocks: For high-growth technology companies represented by the "Big Seven", the median price-to-sales ratio has dropped from 22 times at the beginning of the year to 18 times, but it is still 40% higher than the historical average.Goldman Sachs data shows that the nominal deleveraging of hedge funds to the TMT sector has reached its highest level since January 2021 when "retail investors vs. Wall Street". The resonance between this position adjustment and the deterioration of fundamentals has amplified market volatility.

Faced with this perfect storm, policymakers seem to be caught in a dilemma.Although the Trump administration's tariff policy is intended to revitalize manufacturing, it may increase inflationary pressures. Deutsche Bank estimates that if tariffs on Mexico and Canada are fully implemented, the core PCE inflation rate will jump 0.6 percentage points within three months.The Fed's room for interest rates is constantly being squeezed: although the market is betting on three interest rates, if inflation stickiness exceeds expectations, the shift in monetary policy may trigger more severe market turmoil.This policy dilemma has already begun to emerge in the exchange rate market: the US dollar index bucked the trend and broke through the 105 mark in panic. This simultaneous movement of "safe-haven currencies" and "risky assets" indicates that global capital is restructuring risk pricing models.

When Wall Street traders opened their terminals in the early morning of March 4, they faced not only the threat of a technical bear market, but also a profound interrogation about the shift in economic paradigms.From "Goldilocks" to "the ghost of stagflation", from monetary easing to trade barriers, the underlying logic of the market is undergoing the most drastic restructuring since the end of the Cold War.Perhaps as Carson Group strategist Ryan Detrick said: "This is not an ordinary technical correction, but a collective vote of capital on the end of the dividends of globalization."In this March, every basis point fluctuation is writing a new history, and the Federal Reserve's interest rate decision may determine whether this storm is the prelude or the end.