NEW YORK — Wall Street faced another dramatic downturn on Friday as apprehensions about a deteriorating economy intensified. Fears are escalating due to the troubling combination of escalating inflation and a slowing U.S. economy, spurred largely by a hesitant consumer market cautious about spending amidst the ongoing global trade conflict.
The S&P 500 plunged by 2%, marking one of its steepest declines in the past two years. This decline erased a substantial gain from earlier in the week, marking the fifth losing week out of the past six for the index. Similarly, the Dow Jones Industrial Average dropped by 715 points, or approximately 1.7%, while the Nasdaq composite witnessed a 2.7% decline.
Among the hardest-hit stocks was Lululemon Athletica, which plummeted 14.2% despite exceeding profit expectations for the quarter. The company has warned of slower revenue growth in the coming year, attributing it to consumer hesitation driven by worries about inflation and the economy, explained CEO Calvin McDonald.
Oxford Industries, the parent company of Tommy Bahama and Lilly Pulitzer, also reported better-than-expected quarterly results, yet its stock decreased by 5.7%. CEO Tom Chubb noted an “erosion in consumer sentiment that negatively impacted demand,” which began in January and continued to intensify in February.
These trends are particularly concerning as one of Wall Street’s primary fears is that President Donald Trump’s escalating tariffs could cause consumers and businesses in the U.S. to reduce their spending dramatically. Even if the tariffs bring less economic pain than anticipated, the uncertainty they have created may lead to behaviors detrimental to economic growth.
A report released on Friday highlighted rising pessimism among U.S. consumers regarding their financial futures. According to a survey by the University of Michigan, two-thirds of respondents expect joblessness to rise over the next year; this is the most pessimistic outlook since 2009, raising alarms regarding the job market, which has been a stabilizing force for the U.S. economy.
Another report raised some red flags by showing a core inflation figure slightly higher than economists had predicted for the last month. This measure, closely watched by the Federal Reserve when making interest rate decisions, is crucial in determining future monetary policy.
Brian Jacobsen, the chief economist at Annex Wealth Management, noted that income gains excluding government benefits and other items have been stagnant for three months. “Households are poorly positioned to handle even minor tariff impacts,” he warned. Moreover, with inflation exceeding expectations in February, the Federal Reserve might hesitate to cut interest rates, contrary to actions taken late last year to boost the economy and financial markets.
While the economy and job market have generally been robust, a scenario where both weaken while inflation remains high could lead to “stagflation,” a troubling economic condition with limited policy interventions available in Washington to resolve it.
On Friday, companies dependent on consumer confidence took some of the steepest losses. Stocks like Delta Air Lines (-5%), Caesars Entertainment (-5%), and Domino’s Pizza (-5.1%) saw significant declines.
Tech giants such as Apple and Microsoft also suffered, as these companies, due to their size, significantly influence market indices. Stocks that had soared during the boom tied to artificial intelligence advances have become some of the most affected in the current downturn, with criticisms mounting that their prices had become overinflated compared to earnings and growth.
Conversely, stocks resilient to economic fluctuations, such as those in utilities, saw gains. American Water Works, for instance, rose by 2.2%.
Overall, the S&P 500 dropped by 112.37 points to 5,580.94. The Dow Jones Industrial Average fell by 715.80 to 41,583.90, and the Nasdaq composite decreased by 481.04 to 17,322.99.
Global stock markets could remain unstable as the April 2 deadline for additional tariffs looms. Described as “Liberation Day” by Trump, this date marks the imposition of new tariffs customized for each of the U.S.’s trading partners.
Internationally, markets in Japan and South Korea experienced significant losses after Trump’s announcement of 25% tariffs on car imports. Hyundai Motor in Seoul fell by 2.6%, while in Tokyo, Honda Motor and Toyota Motor decreased by 2.6% and 2.8%, respectively.
Elsewhere, Thailand’s SET index dropped by 1% after a powerful earthquake in Myanmar prompted the prime minister to declare a state of emergency in Bangkok.
In the bond market, the yield on the 10-year Treasury note fell to 4.25% from 4.38% on Thursday, typically declining when forecasts for U.S. economic growth or inflation are reduced.