US stocks took a sharp dive on Friday, fuelled by investor anxieties over potential new tariffs from the Trump administration. Combined with rising consumer inflation expectations and a weaker-than-anticipated jobs report, this news sent the Dow Jones Industrial Average plunging over 400 points, its worst daily performance in a month. The S&P 500 and the tech-heavy Nasdaq Composite also suffered significant losses, declining nearly 1% and 1.4% respectively, marking their second consecutive week of declines.
President Trump’s announcement of upcoming reciprocal tariffs on American imports further exacerbated the market’s downward trajectory. His comments during a meeting with Japanese Prime Minister Shigeru Ishiba, which included the possibility of tariffs on Japan, amplified investor unease.
Consumer sentiment plummeted to a seven-month low in early February, falling short of predictions. Inflation expectations surged amidst growing concerns over the potential impact of Trump’s tariff threats.
The University of Michigan’s 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 sharp increase reflects the mounting concern over the potential inflationary consequences of new tariffs.
The 10-year Treasury yield climbed 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 the US economy added 143,000 jobs, missing economist forecasts. While the labour market demonstrated continued resilience, with unemployment dipping to 4.0% from December’s 4.1%, the overall report failed to bolster investor confidence.
Adding to the market’s troubles, Amazon stock plunged 4% after the e-commerce giant, along with Google and other AI-focused tech companies, issued disappointing revenue forecasts. This news further dampened investor sentiment and contributed to the broad market sell-off.