U.S. stock markets faced a significant decline on Friday, with major indices experiencing notable drops. Concerns regarding economic policies and their effects on businesses and consumers have contributed to this downturn.
Market Performance Overview
The Dow Jones Industrial Average dropped nearly 750 points, marking a 1.7% decrease. Similarly, the S&P 500 also fell by 1.7%, while the Nasdaq composite experienced a more substantial decline of 2.2%. This downturn reflects growing unease among investors about the economic landscape.
Reports indicate that U.S. business activity is nearing a standstill, with growth slowing to a 17-month low. Many companies have expressed reduced optimism due to the uncertain political environment, which has been exacerbated by President Donald Trump’s policies, particularly regarding tariffs and government spending cuts.
Consumer Sentiment and Economic Concerns
Concerns about federal policies are affecting sales and contributing to rising prices, primarily due to tariff-related increases from suppliers. A recent survey revealed that consumers are preparing for higher inflation, with expectations rising to 4.3% over the next year, up from the previous month’s forecast of 3.3%.
The divide in consumer sentiment is becoming more pronounced. Inflation expectations are rising among political independents and Democrats, while slightly declining for Republicans. This shift in perception could have broader implications for consumer spending and overall economic growth.
Housing Market Challenges
A third economic report indicated that sales of previously occupied homes fell short of economists’ expectations. This decline is attributed to relatively high mortgage rates and elevated home prices, which continue to challenge the housing market.
Despite the recent downturn, the U.S. stock market remains up for the year and is close to its all-time high reached earlier this week. Analysts on Wall Street do not foresee a recession in the near term; however, recent reports have raised concerns about the economy’s resilience.
Sector Performance and Notable Stocks
Within the S&P 500, around 75% of stocks experienced losses across various sectors, including technology, airlines, and metals. Notably, Nvidia dropped by 4.1%, while United Airlines and Newmont Mining fell by 6.4% and 5.7%, respectively.
Akamai Technologies, despite reporting stronger-than-expected quarterly profits, suffered a dramatic 21.7% decline as investors reacted negatively to its revenue forecasts, which did not meet expectations. On a more positive note, Celsius Holdings surged by 27.8% after announcing its acquisition of Alani Nu, a beverage company targeting female consumers.
Interest Rates and Economic Outlook
Prior to the sharp decline on Friday, the S&P 500 had been experiencing a week of minimal movement, supported by a series of better-than-expected profit reports. The Federal Reserve has kept its main interest rate steady after a series of cuts at the end of the previous year, indicating a cautious approach due to worries about proposed tariffs and other factors that could worsen inflationary pressures.
Lower interest rates typically stimulate economic growth but can also lead to increased spending that drives inflation higher. Following the release of weaker-than-expected economic reports, Treasury yields fell, with the yield on the 10-year Treasury note dropping to 4.42% from 4.51% the previous day.
International Market Reactions
In international markets, stock indexes in Europe showed mixed results, while Asian markets experienced gains. Notably, Hong Kong’s Hang Seng index rose by 4%, largely driven by strong performance from e-commerce giant Alibaba.
Alibaba reported better-than-expected profits for the previous year and highlighted advancements in its artificial intelligence initiatives, further contributing to investor optimism in the region. This positive performance in Asia contrasts with the challenges faced by U.S. markets, illustrating the varied economic landscapes across different regions.
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