The U.S. stock market experienced a sharp decline on Friday as investors grew increasingly concerned about inflation and the potential impact of tariffs on the economy. The Dow Jones Industrial Average dropped 748 points, or 1.7%, while the S&P 500 and Nasdaq also fell by 1.7% and 2.2%, respectively. The substantial losses marked the Dow’s second consecutive day of decline, with the index plummeting about 1,200 points over Thursday and Friday.
The downturn was driven by a report released on Friday indicating that U.S. consumer sentiment declined in February for the second successive month, with a steep 10% drop from January. The survey revealed that Americans are losing confidence in the economy, largely due to concerns over President Donald Trump’s tariffs potentially increasing prices. A separate poll released on Thursday showed that 62% of U.S. adults feel that Trump isn’t doing enough to address inflation.
Investors fear that a decline in consumer sentiment could result in decreased spending, which is crucial as consumer spending accounts for more than two-thirds of the U.S. economy. While there’s no evidence that a recession is imminent, economic data has weakened in recent months.
Market decline fueled by inflation concerns
Job growth has slowed over the past year, with employers taking a cautious approach regarding the Trump administration’s economic policies, particularly tariffs which could significantly affect corporate profits. Additionally, the housing market continues to decelerate, with sales of existing homes falling 4.9% in January from the previous month. Walmart, the retail giant, announced that its sales and profit growth would slow this year, surprising many on Wall Street who had bet on the company’s consistent growth.
Walmart attributed the sluggish growth forecast to consumer concerns over rising prices and tariffs. The University of Michigan survey revealed that Americans’ expectations for inflation in the coming year surged to 4.3% in February, a full percentage point increase from January and the highest level since November 2023. Another factor weighing down stocks was UnitedHealth, a key Dow component, which sank 7% after a report that the U.S. Department of Justice is investigating the company for its Medicaid billing practices.
UnitedHealth has strongly denied the report. Despite the significant drop, stocks remain close to their all-time highs. The S&P 500 had hit a record on Wednesday before retreating slightly on Thursday.
