Wall Street Closes Lower Amid Trade War Escalation and Weak Economic Data

U.S. Markets React to President Trump’s Trade Tariff Announcement and Slowing Job Growth

February 7, 2025 – U.S. stock markets closed lower on Friday as concerns over escalating trade tensions and weak economic data weighed heavily on investor sentiment. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all experienced significant declines, primarily driven by renewed fears over a potential trade war and disappointing economic indicators.

Market Movements:

• Dow Jones dropped 444.23 points, or 0.99%, closing at 44,303.40.
• S&P 500 fell 57.58 points, or 0.95%, to 6,025.99.
• Nasdaq Composite tumbled 268.59 points, or 1.36%, finishing at 19,523.40.

Trade War Fears and Weak Data Impact Markets

The decline in stock prices followed President Donald Trump’s announcement on Friday that he would impose reciprocal tariffs on several countries, signaling a broad trade action likely to impact global markets. While Trump did not specify which countries would face the tariffs, he emphasized that the move could help address U.S. budget deficits.

This announcement reignited concerns over a potential trade war and overshadowed other news, including a weak payroll report and disappointing consumer sentiment data.

Economic Data Points:

• Nonfarm payrolls increased by just 143,000 in January, falling short of expectations and reflecting a slowdown in job growth.
• The U.S. unemployment rate remained stable at 4%, offering some relief to markets but failing to offset the negative impact of the weaker-than-expected jobs report.
• U.S. consumer sentiment dropped unexpectedly in February to a seven-month low, and inflation expectations surged, with households predicting a 4.3% inflation rate over the next year – the highest since November 2023.

Sector Performance and Notable Stock Movements

Despite the broader market downturn, Uber Technologies (UBER) saw a 6.6% jump after Bill Ackman, a prominent hedge fund manager, disclosed a large stake in the company. On the other hand, Amazon (AMZN) dropped by 4.1%, following weaker-than-expected performance in its cloud computing business (AWS).

Other Key Moves:

• Expedia (EXPE) surged 17.3% after posting better-than-expected fourth-quarter results.
• Elf Beauty (ELF) fell 19.6% after cutting its annual sales and profit forecasts.

Market Volatility and Federal Reserve Expectations

The Cboe Volatility Index (VIX), also known as Wall Street’s “fear gauge,” rose by 6.6%, closing at 16.3. With economic uncertainty mounting, **investors are adjusting expectations for future Federal Reserve interest rate cuts. Traders now anticipate one rate cut in 2025, down from previous predictions of two cuts starting in June.

Weekly Performance Summary

For the week, all three major indexes finished lower:

• Dow Jones ended down 0.54%, breaking a three-week streak of gains.
• S&P 500 dipped by 0.24%.
• Nasdaq lost 0.53%.