New York, New York – US stocks faced a significant decline on Friday amid concerns over consumer sentiment and inflation data pointing to an increase in the Federal Reserve’s core PCE index. The Dow plummeted 750 points, the S&P 500 fell 2.1%, and the Nasdaq Composite slid 2.8%.
Investors are grappling with the delicate state of the economy as businesses prepare for President Donald Trump’s tariffs. The S&P 500 is down by 5% year-to-date, heading towards its first losing quarter since September 2023.
The Personal Consumption Expenditures index saw a 2.5% year-over-year increase in February. The core PCE index, without volatile categories like food and energy, rose to 2.8% year-over-year, implying that inflation remains above the Fed’s 2% target. At the same time, consumer sentiment dropped 12% in the latest University of Michigan survey.
Lululemon’s stock plunged 15% following concerns about consumer spending outlook. CEO Calvin McDonald mentioned the challenging macro environment contributing to a more cautious consumer sentiment.
Wall Street is also reacting to Trump’s announcement of tariffs on cars and car parts, scheduled to come into effect in April and May, respectively. This move has sparked fears of higher prices due to potential impacts on the economy.
Investors are displaying risk-averse behavior, snapping up government bonds as the yield on the 10-year Treasury note fell to 4.27%. The fear gauge, VIX, surged 10% as the Fear and Greed Index reflected a sentiment of “extreme fear” among investors.
The anticipated impact of auto tariffs on the economy has led business executives to take a cautious stance on new investments, citing concerns about the administration’s tariff policy. The uncertainty surrounding tariffs has created anxiety among investors and could lead to market volatility in the coming weeks.
Despite revisions to year-end targets for US stocks, providing lower estimates, analysts are also forecasting a rise in gold prices. Gold, considered a safe haven investment during times of economic turmoil, is expected to see an increase amid ongoing economic and geopolitical uncertainty.
The evolving situation surrounding tariffs, inflation, and market expectations continues to shape the trajectory of the US economy and global markets. Investors are closely monitoring developments to navigate the current economic landscape and its potential implications for various sectors in the coming months.