US stocks experienced a significant decline on Friday, primarily driven by investor concerns over potential new tariffs from the Trump administration. This news, coupled with a surge in consumer inflation expectations and a weaker-than-anticipated jobs report, contributed to the market downturn. The Dow Jones Industrial Average (^DJI) plummeted over 400 points, marking its worst single-day performance in nearly a month. Both the S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC) also suffered losses, declining nearly 1% and 1.4% respectively, extending their losing streak to a second consecutive week.
President Trump’s announcement of forthcoming reciprocal tariffs on American imports further fueled investor anxieties. During a meeting with Japanese Prime Minister Shinzo Abe, President Trump indicated that tariffs on Japan were also under consideration. These remarks exacerbated existing concerns about escalating trade tensions and their potential impact on the global economy.
Consumer sentiment took a hit, falling to a seven-month low in early February. Inflation expectations soared to their highest level since November 2023, reflecting growing unease surrounding the potential inflationary effects of proposed tariffs.
The University of Michigan’s consumer sentiment survey revealed that Americans now anticipate a 4.3% inflation rate over the next year, a full percentage point higher than the previous month’s forecast. This significant jump in inflation expectations underscores the growing concern among consumers about the potential impact of trade policies on prices. The 10-year Treasury yield (^TNX) reacted to the news, rising to a session high of 4.5% following the release of the consumer sentiment data and the monthly jobs report.
The January jobs report indicated that the US economy added 143,000 jobs, falling short of economist predictions. While the labor market showed signs of continued resilience, the miss contributed to the overall negative sentiment in the market. The unemployment rate did experience a slight decline, ticking down to 4.0% from December’s 4.1%.
Amazon (AMZN) stock price tumbled 4% after the e-commerce behemoth, along with Google (GOOG) and other AI-focused tech giants, issued disappointing revenue forecasts. This news further dampened investor sentiment and contributed to the broader market decline. The confluence of trade concerns, rising inflation expectations, a weaker-than-expected jobs report, and disappointing corporate earnings outlooks created a perfect storm for the stock market today, resulting in a significant drop in the Dow Jones Industrial Average and other major indices.
