Wall Street’s primary indexes fell sharply on Friday, as data underscored underlying price pressures, stoking fears that the Trump administration’s tariff maneuvers could further exacerbate inflationary trends.
All the US’s major indices had fallen by Friday afternoon with the S&P 500 closing down 2%, the Dow Jones declining 1.7% and the tech-heavy Nasdaq slumping 2.7%.
A commerce department report showed the personal consumption expenditures (PCE) price index rose in line with expectations. However, excluding volatile items such as food and energy, the index rose more than expected on an annual basis in the previous month, while consumer spending rebounded after falling in January.
The PCE price index is the Federal Reserve’s preferred measure of inflation and core PCE – excluding food and energy – rose by 2.8% in February, up from 2.6% in January, still uncomfortably above the Fed’s 2% annual inflation rate target.
The Fed has held off cutting interest rates as it monitors the rate of inflation citing “heightened uncertainty” for the decision earlier this month.
Adding to the unease, final figures released by the University of Michigan showed consumer sentiment deteriorated further in March to its lowest level since 2022.
Equities have experienced significant declines over the past month, driven by concerns that Donald Trump’s wavering policies might steer the economy towards a period of heightened inflation and tepid growth, potentially complicating the Federal Reserve’s monetary policy trajectory.
“The problem is we don’t know the rules and businesses really struggle with that,” said Bob Doll, chief executive officer of Crossmark Investments.
“Part of the economic weakness we’re experiencing and likely to see more of is a function of individuals and businesses saying, ‘I’m not quite sure what tomorrow’s going to bring, so I’ll just be a little more cautious.’”
Trump’s steadfast commitment to a 25% tariff on auto imports, set to take effect next week, weighed on auto stocks for a second day, with General Motors and Ford falling over 2% each.
Attention now turns to a fresh round of tariffs the US intends to unveil on 2 April, with Trump hinting that these measures might diverge from the straightforward tit-for-tat duties previously pledged.
Simultaneously, a report indicated that the European Union is weighing concessions to Trump after the enactment of reciprocal tariffs.
Reuters contributed reporting
