The stock market dropped sharply on Monday as tariff concerns, a falling dollar, and rising yields hit the stock market. Consumer goods companies look like they’re facing a very uncertain year.
The most notable moves on Monday came in home improvement retail, consumer retail, and fashion. Home Depot (HD 1.45%) dropped 3.6% on Monday, Lowe’s Companies (LOW 1.83%) was down 2.8%, Boot Barn Holdings (BOOT 2.25%) fell 2.6%, and Deckers Outdoor (DECK 1.05%) had dropped 2% by market close.
The overhang of tariffs lingers
The market continues to look for signs that a tariff deal or two is on the way, with reports over the weekend that Japan, Europe, and even China were open to talks. But when the market opened on Monday, there were no deals. And tariffs of 20% or more were still in place.
If tariffs were a negotiating tactic, they would be a temporary hit to the market and maybe earnings, and a temporary impact is manageable. If tariffs are going to stay and potentially go higher, there’s real concern that companies like Deckers Outdoor are going to have to raise prices or cut margins.
Then there’s the economic impact overall, which could include a recession if prices rise and people have less to spend on goods and services. You can imagine that some of the first items to be cut back on might be expensive running shoes and that big home improvement project.
The dollar and bond yields
Stock investors often overlook currencies and bond markets, but the moves are big enough and in a direction to be concerning. The U.S. dollar index fell 1.1% on Monday and is down over 10% from its peak early in 2025.
When added to 10% blanket tariffs and some additional country tariffs, particularly on China, imports into the U.S. are at least 20% more expensive than they were a few months ago, which will squeeze consumers.
The bond market is even more concerning. There’s fear the U.S. will go into a recession, but tariffs could raise prices, so cutting interest rates could fuel inflation.
Investors aren’t betting on lower rates; they’re betting on higher rates. In the last month, the 10-year government bond yield has gone up 16 basis points to 4.41% and was up 9 basis points on Monday. By comparison, the rates in Europe are all down over the past month.
The market is selling uncertainty
We don’t know what’s going to happen next with the tariffs or the economy, but it doesn’t look good for the companies I’ve mentioned here. Consumers are less likely to be freely spending if prices rise sharply, and that could impact retailers and fashion across the board.
The falling dollar and rising yields also indicate this shift in global sentiment could be structural. The U.S. has enjoyed low yields for decades because of its status as a global reserve currency, but that may change. And if government yields rise, investors will demand more yield from stocks, which leads to lower stock prices.
Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Deckers Outdoor and Home Depot. The Motley Fool recommends Boot Barn and Lowe’s Companies. The Motley Fool has a disclosure policy.
