US STOCKS-Wall Street set for heavy losses, S&P 500 nears bear territory

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By Pranav Kashyap and Purvi Agarwal

April 7 (Reuters) - Wall Street's main indexes braced for steep losses at the open on Monday, with the S&P 500 near bear market territory, as investors sought refuge in government bonds on economic worries over the fallout of U.S. President Donald Trump's sweeping tariff plans.

The 10-year U.S. Treasury yields US10YT=RR fell to 3.986%, with investors pricing in a chance of a fifth interest-rate cut from the Federal Reserve this year.

Futures, however, pared losses slightly after White House economic adviser Kevin Hassett played down economic concerns over Trump's tariffs, saying the U.S. president has talked to world leaders all weekend and will listen to proposals for "great deals".

S&P 500 E-minis EScv1 were down 128.25 points, or 2.51%, Nasdaq 100 E-minis NQcv1 were down 449.75 points, or 2.56%, and Dow E-minis 1YMcv1 were down 892 points, or 2.32%.

"What we're seeing is more of a technical bounce after a very steep selloff, but it's not necessarily the end of the selloff," said Fiona Cincotta, senior market analyst at City Index.

"For that to happen, we would need to see fundamental changes such as Trump walking back some trade tariffs or some sense that the global economy will perform okay regardless, or central banks stepping in to support economies."

S&P 500 futures are down more than 20% from their peak, suggesting the benchmark index .SPX is heading toward bear market territory. If the index ends down 20% from its all-time closing highs, it would confirm the index has been in a bear market since February.

Futures linked to the Dow also fell 20% from their record high.

Trump announced hefty tariffs against U.S. trading partners last week, sparking retaliation from China and fueling concerns that the trade war will impede economic growth and stoke inflationary pressures.

In the two sessions after Trump's tariff decision, the S&P 500 has tumbled 10.5%, erasing nearly $5 trillion in market value, marking its most significant two-day loss since March 2020.

Trump told reporters late on Sunday that investors must endure the consequences and that he would refrain from negotiating with China until the U.S. trade deficit is addressed.

Futures tracking the U.S. small-cap Russell 2000 index RTYcv1 tumbled 3.3%, underscoring concerns about the health of the domestic economy.

The CBOE Volatility index .VIX, seen as Wall Street's fear gauge, was at 48.89 points, its highest since August 2024.

Stocks fell across the board in premarket trade, with megacaps continuing to bear the brunt. Apple AAPL.O was down 2.7%, Nvidia NVDA.O lost 4.8%, while Amazon.com AMZN.O shed 2.1%.

Howmet Aerospace HWM.N dropped 5.2%, after a report said the aircraft parts supplier may halt some shipments if they are impacted by Trump's tariffs.

The sharp declines in the past two sessions pushed the tech-heavy Nasdaq .IXIC into bear market, while the Dow Jones Industrial Average .DJI slumped more than 10% from its record-closing high.

The fear of a tariff-led recession caused markets to bring into play the chances of an interest-rate cut in May, with traders seeing a near 60% possibility, according to data compiled by LSEG.

Several speeches by Fed officials and a series of economic indicators, including consumer price data, are slated throughout the week, with markets keenly observing any signals of recessionary fears.

(Reporting by Pranav Kashyap, Sruthi Shankar and Purvi Agarwal in Bengaluru; Editing by Arun Koyyur and Shounak Dasgupta)

((Pranav.Kashyap@thomsonreuters.com; +919886482111))