The US stock markets witnessed a significant downturn on Friday following an economic report that highlighted growing concerns among American consumers about rising prices and the potential impact of President Donald Trump’s tariffs on inflation.
The Dow Jones Industrial Average plummeted by 748 points, equating to a 1.7% decrease. Similarly, the broader S&P 500 index also fell by 1.7%, while the Nasdaq saw a more pronounced decline of 2.2%. This marked the second consecutive day of losses for the Dow, contributing to a cumulative drop of approximately 1,200 points over Thursday and Friday.
The latest survey from the University of Michigan, released on Friday, revealed a decline in US consumer sentiment for February, marking the second month of consecutive drops. The final reading showed a steep 10% decrease from January, doubling the initial decline reported earlier this month. Concerns about tariffs potentially driving up prices were the primary factor behind this loss of confidence.
A newly released CNN poll on Thursday echoed this sentiment, showing a rise in pessimism due to increasing prices. According to the poll, nearly two-thirds of US adults, or 62%, believe that President Trump is not doing enough to combat inflation. The Michigan survey further indicated that Americans are now more fearful of higher inflation in the near future.
Investors are concerned that weakened consumer sentiment could lead to reduced shopping activities, a crucial component as consumer spending accounts for more than two-thirds of the US economy. Although there is no immediate indication of a recession, recent months have seen weakened economic data. Job growth has slowed as employers remain cautious about the potential implications of the Trump administration’s economic policies, particularly tariffs, which could negatively impact corporate profits.
The housing sector is also showing signs of slowing down. A report from the National Association of Realtors on Friday indicated a 4.9% drop in sales of existing homes in January compared to the previous month, coupled with a surge in prices to a record high for the month, exacerbating the home affordability crisis in the US. Additionally, retail sales have recently declined.
On Thursday, Walmart issued a warning that its sales and profit growth are expected to slow this year, surprising many on Wall Street who had anticipated continued growth. The retailer attributed its lackluster forecast to consumer fears about rising prices and tariffs. This sentiment was reinforced by Monday’s University of Michigan survey, which found that inflation expectations for the upcoming year surged to 4.3%, up a full percentage point from January, reaching the highest level since November 2023.
The decline in stock values was further exacerbated by a significant drop in UnitedHealth shares, a key component of the Dow, which fell by 7% following a Wall Street Journal report about a US Department of Justice investigation into the company’s Medicaid billing practices. UnitedHealth has strongly denied the report.
Despite the recent downturn, stock values remain close to their all-time highs. The S&P 500 reached a record high on Wednesday before experiencing a slight decline on Thursday.
Report contributed by CNN’s Bryan Mena.
