stocks tumble as economic reports signal potential impact of trump policies
On Friday, the stock market experienced a significant downturn, with major indices plummeting amid concerns over weaker-than-expected economic reports. These reports hinted that President Trump’s policies might be taking a toll on U.S. business activity, while consumer sentiment dropped to its lowest point in 15 months. The S&P 500 and the Dow Jones Industrial Average both fell 1.7%, marking their worst single-day declines since December 18, according to data from FactSet. The tech-heavy Nasdaq composite index also took a hit, tumbling 2.2%. The sell-off was fueled by a preliminary report from S&P Global, which revealed that U.S. business activity is slowing down, nearing "stall speed," with growth reaching a 17-month low. The report highlighted that activity in the U.S. services sector unexpectedly contracted, with businesses citing slumping optimism due to concerns over Trump administration policies, including potential new tariffs and domestic spending cuts.
businesses voice concerns over policy uncertainty
The economic downturn appears to be linked to growing uncertainty over federal government policies. Chris Williamson, chief business economist at S&P Global Market Intelligence, noted that companies are expressing widespread concerns about the impact of these policies, ranging from spending cuts to tariffs and geopolitical developments. "Sales are reportedly being hit by the uncertainty caused by the changing political landscape, and prices are rising amid tariff-related price hikes from suppliers," Williamson said. This sentiment was echoed by businesses across various sectors, as the unpredictability of the current political climate continues to weigh on their operations and decision-making.
inflation worries and consumer sentiment
Inflation concerns also played a significant role in Friday’s market drop. A University of Michigan survey found that consumers are bracing themselves for higher inflation due to potential tariffs, with expectations for price increases over the next 12 months jumping to 4.3%—a notable rise from last month’s forecast of 3.3%. This shift in consumer sentiment reflects the broader anxiety about the economic landscape. Tariffs, which are essentially taxes on imported goods, often lead to higher prices for consumers, as retailers like Walmart pass on the additional costs. The survey also revealed a partisan divide in inflation expectations, with independents and Democrats expecting higher inflation while Republicans’ expectations slightly decreased. This divergence highlights the polarized views on the economy and policy outcomes.
corporate earnings add to market jitters
The market’s unease was further compounded by underwhelming corporate earnings reports. Retail giant Walmart, often seen as a bellwether for consumer spending, provided a lackluster sales and profit forecast for 2025, falling short of analysts’ expectations. Walmart executives warned of new challenges in an uncertain economic environment, sending the company’s shares down 2.5% on Friday, following a 6.5% drop the previous day. Gina Bolvin, president of Bolvin Wealth Management Group, noted that Walmart’s weaker guidance, combined with policy uncertainty, could be the catalyst for a "healthy correction" in the market.
broad sell-off across sectors
The sell-off was not limited to specific sectors but was widespread across the market. Even within the S&P 500, roughly 4 out of every 5 stocks declined. Big Tech companies, which had been on a tear amid the artificial intelligence frenzy, were among the biggest losers. Nvidia, a leader in AI technology, fell 2.5%. Airlines and metals companies also took a hit, with United Airlines dropping 5.5% and Newmont Mining falling 4.4%. Akamai Technologies, a cybersecurity and cloud computing firm, saw the steepest decline in the S&P 500, plummeting 20.6% despite reporting stronger-than-expected profits. Investors instead focused on the company’s disappointing forecasts for revenue and other financial metrics in the coming year.
market resilience and the bigger picture
Despite Friday’s sharp declines, the U.S. stock market remains resilient, with gains still intact for the year and the S&P 500 not far from its all-time high set earlier in the week. Few on Wall Street are predicting an imminent recession, and the recent run of better-than-expected corporate earnings had helped offset concerns about stubbornly high inflation. However, Friday’s reports collectively raised red flags about the economy’s resilience, underscoring the challenges posed by policy uncertainty, inflation fears, and slowing business activity. While the market’s long-term outlook remains positive, the day’s events served as a stark reminder of the vulnerabilities in the economic landscape.
