US stock markets tumbled on Friday, with the Dow Jones Industrial Average suffering its worst day in a month, shedding over 400 points. Investor anxieties were fueled by President Trump’s threat of new import tariffs and rising inflation expectations. The S&P 500 and Nasdaq Composite also fell sharply, down nearly 1% and 1.4% respectively, their second straight week of losses.
President Trump’s comments during a meeting with Japanese Prime Minister Shinzo Abe sparked market jitters. He hinted at plans for reciprocal tariffs on US imports and suggested tariffs on Japan were also possible. These remarks amplified existing concerns about escalating trade tensions and their potential to hinder global economic growth.
Consumer confidence plunged to a seven-month low in early February, missing forecasts. Inflation expectations surged to their highest point since November 2023, driven by fears of the threatened tariffs. This rise in inflation expectations further dampened market sentiment, as investors worried about potential price hikes and reduced consumer spending.
The University of Michigan’s consumer survey showed Americans now expect a 4.3% inflation rate over the next year, a full percentage point higher than last month. This heightened inflation expectation added to market unease. The 10-year Treasury yield jumped to a session high of 4.5% in response to the inflation data and the monthly jobs report.
While the January jobs report showed 143,000 jobs added, missing economist predictions, it still pointed to a healthy labour market. The unemployment rate dipped to 4.0% from 4.1% in December. However, positive news from the jobs report was overshadowed by worries about tariffs and inflation.
Amazon’s share price plummeted 4% after the e-commerce giant, along with Google and other major tech companies focused on artificial intelligence, issued disappointing revenue forecasts. This fueled broader concerns about the tech sector’s performance and its impact on the overall market. The combination of negative news, including tariff threats, rising inflation, and disappointing corporate earnings, created a perfect storm for the markets, triggering the sharp decline in the Dow and other major indices.