US stocks tumbled on Friday, with the Dow Jones Industrial Average (^DJI) plummeting over 400 points in its worst day in nearly a month. The sell-off was triggered by fears of new tariffs from the Trump administration, coupled with rising inflation expectations and a disappointing jobs report. The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) also fell sharply, extending their weekly losing streak to two.
President Trump’s announcement of potential reciprocal tariffs on American imports, including those from Japan, further rattled investors. Concerns about escalating trade tensions and their impact on the global economy weighed heavily on market sentiment.
Consumer sentiment slumped to a seven-month low in early February, as inflation expectations surged to their highest level since November 2023. This reflects growing anxieties about the potential inflationary effects of the proposed tariffs.
The University of Michigan’s consumer sentiment survey revealed that Americans now expect a 4.3% inflation rate over the next year, a full percentage point higher than last month’s forecast. This jump underscores growing concern about the impact of trade policies on prices. The 10-year Treasury yield (^TNX) spiked to a session high of 4.5% following the release of the consumer sentiment data and the jobs report.
The January jobs report showed the US economy added 143,000 jobs, below economist expectations. While the labour market remained resilient, the miss contributed to the negative market sentiment. The unemployment rate edged down to 4.0% from 4.1% in December.
Amazon (AMZN) shares fell 4% after the e-commerce giant, along with Google (GOOG) and other AI-focused tech companies, issued disappointing revenue forecasts. This further dampened investor confidence and contributed to the broader market decline. The combination of trade worries, rising inflation, a weaker-than-expected jobs report, and poor corporate earnings outlooks created a perfect storm for the market, sending the Dow and other major indices sharply lower.