As April 2 draws closer, it is evident that the markets are getting tensed. Trump administration has announced a new round of tariffs to be implemented on April 2, which President Trump has referred to as ‘liberation day.”
US Stocks closed substantially lower on Friday, driven down by rising inflation concerns and more trade policy uncertainties.
The S&P 500 slid 2%, the Dow Jones sank 715 points, and the Nasdaq 100 tumbled 2.7%. Tech giants led the decline. Apple was down 2.6%, chipmakers Nvidia and Broadcom each lost roughly 1.5%, Microsoft and Tesla both fell more than 3%, and Amazon, Alphabet, and Meta Platforms all plummeted more than 4%.
The S&P 500 and Nasdaq lost over 1% and 2% respectively, booking their fifth weekly drop in six weeks, while the Dow declined 0.8%.
Uncertainty over the effects of tariffs and mounting concerns that the economy may be entering a recession have caused the S&P 500 and Nasdaq to lose territory in five of the previous six weeks.
Inflation is remaining sticky even before full-blown tariffs are in place. This makes a case for stagflation where inflation remains high and growth falters.
One big indicator to gauge the shape of the economy is the yield on the 10-year Treasury note. The US 10-year yield has started sliding and at 4.25% in late trading, down from 4.37% at previous close. The yield tends to fall when concerns about the economy rise.
Inflation remains a another big worry for the market, US Fed and the consumers. Inflation worries intensified after the University of Michigan’s final consumer sentiment reading for March showed the highest long-term inflation expectations since 1993.
The University of Michigan’s consumer mood data was also worse than anticipated, with the main index hitting its lowest point since late 2022. Expectations for inflation also rose to their highest point since 2022.
The report is the most recent evidence of declining consumer confidence, which might lead to a slowdown in spending and a halt in economic growth.
Meanwhile, the core PCE price index, the Fed’s preferred inflation measure, rose 2.8% in February, surpassing forecasts, while consumer spending grew 0.4%.
Core inflation, which does not include volatile food and energy costs, increased more than economists had predicted, according to the Personal Consumption Expenditures data that was released yesterday.
Concerns that the U.S. economy may be on the verge of a period of high inflation and poor growth are heightened by the most recent data, the annual core PCE, which increased from 2.7% in February to 2.8% in February. This is especially true once the effects of tariffs are seen in the upcoming months.
US stocks are also under pressure in recent days on renewed concerns about tariffs, as President Trump placed duties on all imports of autos and auto parts and reinforced promises that further tariffs will be imposed next week. Investors braced for further trade disruptions as Trump’s 25% auto tariff takes effect next week, sparking concerns of retaliatory measures from key trading partners.
Global markets will be closely watching next week developments as Trump’s reciprocal tariffs take effect and affect trade agreements worldwide. Expect a lot of stock fluctuations based on developments and news, and be prepared for some additional volatility.