US stock markets experienced a significant decline on Friday following an economic report indicating growing concerns among American consumers about price increases and the potential impact of President Donald Trump’s tariffs on reigniting inflation. The Dow Jones Industrial Average dropped 748 points, or 1.7%, while the broader S&P 500 fell by the same percentage, and the Nasdaq decreased by 2.2%. This marked the Dow’s second consecutive day of losses, with a total decline of approximately 1,200 points over Thursday and Friday.
The University of Michigan’s latest survey, released on Friday, revealed a decline in US consumer sentiment for the second consecutive month in February, showing a steep 10% drop from January. This decline was twice what was initially reported earlier this month. The survey highlighted that Americans are losing confidence in the economy, primarily due to concerns over Trump’s tariffs potentially increasing prices.
A recent CNN poll similarly indicated rising pessimism due to prices, with nearly two-thirds of US adults, or 62%, stating that they feel Trump isn’t doing enough to address inflation. The Michigan survey also showed that Americans are now worried about higher inflation in the future.
Investors became concerned that weak consumer sentiment could lead to a reduction in Americans’ shopping habits, which account for more than two-thirds of the US economy. Although there is no indication of an impending recession, economic data has weakened in recent months. Job growth has slowed over the past year as employers await clarity on the Trump administration’s economic policies, particularly regarding tariffs, which could significantly impact companies’ profits. Housing continues to slow down, with a National Association of Realtors report showing a 4.9% drop in existing home sales in January from the previous month, while prices reached a record high for the month, worsening America’s home affordability crisis.
Retail sales have also declined recently. Walmart warned on Thursday that its sales and profit growth would slow this year, surprising many on Wall Street who expected the company’s low prices on essentials to sustain its strong growth even during the worst of the inflation crisis. The retailer attributed its lackluster growth forecast to consumer fears over rising prices and tariffs. This was echoed by the University of Michigan survey, which found that concerns surrounding tariffs have affected Americans’ perception of prices, with expectations for inflation in the year ahead surging to 4.3%, up a full percentage point from January to the highest level since November 2023.
Stocks were further dragged down by UnitedHealth, a key Dow component, which fell 7% following a Wall Street Journal report that the US Department of Justice is investigating the company for its Medicaid billing practices. The company strongly denied the report.
Despite the recent plunge, stocks remain close to their all-time highs, with the S&P 500 hitting a record on Wednesday before slightly retreating on Thursday.
— news from CNN