Wall Street endured a sharp selloff on Friday, with major indices posting steep declines as renewed inflation concerns and escalating trade tensions rattled investors. The latest U.S. economic data pointed to higher consumer prices, fueling speculation that the Federal Reserve may delay interest rate cuts, while President Donald Trump’s tariff policies added to market uncertainty.
The S&P 500 dropped 1.97% to close at 5,580.94 points, while the Nasdaq Composite tumbled 2.70% to 17,322.99 points. The Dow Jones Industrial Average also suffered significant losses, declining 1.69% to 41,583.90 points.
Inflation Data Sparks Fresh Concerns
U.S. consumer spending rebounded in February but fell short of expectations, indicating weak economic growth. However, underlying inflation pressures surged, with core prices rising at the fastest pace in 13 months.
A separate University of Michigan survey showed that consumers’ 12-month inflation expectations climbed to the highest level in over two years, reflecting concerns that inflation could remain elevated beyond 2025.
These developments alarmed investors, reinforcing fears that the Federal Reserve may hold off on cutting interest rates despite previous expectations for monetary easing.
Highlights from Inflation Data:
Core inflation accelerated at its highest rate in over a year.
Consumer inflation expectations surged, raising concerns about persistent price pressures.
The Federal Reserve may delay rate cuts, adding uncertainty to market outlooks.
Tech Stocks Lead the Market Decline
The latest economic concerns hit technology stocks the hardest, with investors offloading shares in some of Wall Street’s most valuable companies.
Amazon (-4.3%), Microsoft (-3.0%), and Apple (-2.7%) led the sector-wide selloff.
The Nasdaq Composite fell nearly 3%, its worst day in weeks.
Communication services (-3.81%) and consumer discretionary (-3.27%) were the worst-performing S&P 500 sectors.
“Investors are increasingly cautious about the impact of tariffs on supply chains, production costs, and corporate earnings,” said Greg Bassuk, CEO of AXS Investments. “The inflation impact of tariffs hasn’t fully shown up yet, which means this may just be the calm before the storm.”
Trump’s Tariffs Add to Market Anxiety
The selloff intensified after President Donald Trump reaffirmed his stance on tariffs, particularly on auto imports. A 25% tariff on foreign cars, set to take effect next week, sent automaker stocks tumbling for a second straight day:
General Motors (-1.1%) and Ford (-1.8%) both declined.
Investors worry that higher costs from tariffs will weigh on corporate profits and consumer spending.
Adding to trade war concerns, the White House is preparing a new round of tariffs set to be unveiled on April 2. Unlike previous tit-for-tat measures, Trump suggested these duties might take a different approach, raising fears of unpredictable economic consequences.
Market Reaction to Trade Policies:
Auto stocks extended losses amid fears of higher input costs.
Lululemon Athletica (-14%) slashed its annual forecasts, citing tariff-related uncertainty.
Mining companies surged on higher gold prices, with Harmony Gold (+9.5%) and Gold Fields (+4.5%) rallying.
Fed Rate Cut Expectations Shift
Despite growing concerns over economic slowdown, market sentiment suggests that the Federal Reserve may be hesitant to cut rates too soon.
Interest rate futures indicate that traders see a 76% probability that the Fed will cut rates by 25 basis points by June. However, higher-than-expected inflation data and uncertainty over tariff-driven price hikes could delay monetary easing.
An index tracking interest rate-sensitive bank stocks declined 2.3%, reflecting uncertainty in the financial sector.
Shifting Fed Policy Expectations:
Market rate cut expectations have softened in response to inflation worries.
Bank stocks slumped, reflecting concerns over prolonged higher interest rates.
The CBOE Volatility Index (VIX) spiked, reaching a one-week high.
Stock Market’s Broader Weakness
Friday’s market rout added to a difficult quarter for U.S. stocks, with major indices showing signs of long-term weakness:
The S&P 500 is down nearly 9% from its record close on February 19.
The Nasdaq has lost 14% since its all-time high in December 2024.
The S&P 500 is on track for its first quarterly decline in six quarters.
UBS Global Wealth Management lowered its year-end target for the S&P 500 to 6,400 from 6,600, citing the economic uncertainty stemming from rising inflation, tariffs, and volatile earnings projections.
IPO Struggles and Market Liquidity Concerns
The uncertainty surrounding inflation and tariffs is also impacting new stock market listings.
CoreWeave, an Nvidia-backed AI infrastructure company, made its Nasdaq debut on Friday but opened nearly 3% below its offer price.
Analysts warn that continued market volatility could further deter IPO activity in 2025.
Meanwhile, trading volume was lighter than usual, with only 14.3 billion shares exchanged compared to a 20-session average of 16.2 billion shares.
Sector-Wide Weakness and Declining Stocks
Market breadth remained negative, with declining stocks overwhelmingly outnumbering gainers:
S&P 500: 10 new highs, 23 new lows.
Nasdaq Composite: 35 new highs, 358 new lows.
Declining stocks outpaced rising ones by a 4.5-to-1 ratio.
Wolfspeed, a struggling semiconductor company, saw its stock plummet 52% after appointing a new CEO amid financial difficulties.
With inflation fears escalating, tariffs weighing on corporate outlooks, and the Federal Reserve facing difficult policy decisions, investors remain on edge as Wall Street experiences its steepest pullback in months.
