Wall Street Sinks as Tariffs and Inflation Hit Confidence

28 Mar at 11:55 am

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Wall Street Sell-Off Deepens as Trump Tariff Fears Grow

Wall Street Sinks as Tariffs and Inflation Hit Confidence/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. stock indexes fell Friday as new data showed inflation staying hot and consumer spending weakening. Retailer warnings and soft economic signals rattled Wall Street, raising fears over the impact of tariffs and slower growth. AI-related stocks offered slight support, but broader sentiment remains cautious ahead of more expected tariffs.

FILE – The New York Stock Exchange is shown on June 11, 2024 in New York. European markets have opened with gains on Monday, June 24, 2024, and Asian benchmarks retreated after U.S. stocks coasted to the close of their latest winning week. (AP Photo/Peter Morgan, File)

Markets Slide as Inflation Stays Hot and Consumer Sentiment Wavers Quick Looks

S&P 500, Dow, and Nasdaq all lower Friday morning
Inflation gauge rises above expectations; Fed rate cuts in doubt
Lululemon falls 13% after weak consumer outlook despite profit beat
Oxford Industries also drops on signs of slowing demand
Trump tariffs spark market anxiety as April 2 deadline nears
Consumer income growth stagnates, further worrying investors
AI and energy stocks provide limited market support
Global auto stocks sink after 25% U.S. tariff announcement

Wall Street Sinks as Tariffs and Inflation Hit Confidence

Deep Look

Wall Street edged lower Friday after a combination of inflation concerns and soft consumer data renewed fears that the U.S. economy may be heading for a slowdown — or worse, a prolonged period of stagflation.

The S&P 500 slipped 0.5%, putting the index on track to erase what was once a winning week. If losses hold, it would mark the fifth losing week in the past six. The Dow Jones Industrial Average dropped 263 points, or 0.6%, while the Nasdaq Composite fell 0.7%, led by declines in consumer and tech stocks.

Inflation Data Disappoints

A key inflation gauge — the core PCE index, the Federal Reserve’s preferred measure — came in slightly hotter than expected, rising 0.4% month-over-month in February. That was its biggest increase in over a year, undermining hopes that inflation was cooling and adding uncertainty to the Fed’s interest rate path.

“The Fed isn’t likely to run to the rescue,” said Brian Jacobsen, chief economist at Annex Wealth Management. “With inflation moving higher and incomes stagnating, households aren’t in a strong position to absorb tariff-related costs.”

Indeed, a closer look at the data showed that real consumer incomes, excluding government support and one-time benefits, have essentially flatlined for the past three months — a troubling sign for future spending.

Retailers Signal Consumer Strain

Major retailers added to the market’s unease. Lululemon Athletica plunged 13.3% despite beating earnings expectations. The company warned of slowing revenue growth and cited rising concerns among consumers about inflation and the economy.

“Consumers are spending less,” said CEO Calvin McDonald, pointing to tariffs and currency pressures as additional headwinds for profitability.

Similarly, Oxford Industries, the parent company of Tommy Bahama and Lilly Pulitzer, reported strong earnings but saw shares drop 3.3%. CEO Tom Chubb said consumer sentiment began deteriorating in January and worsened in February.

These retail sector warnings are landing just as investors brace for President Donald Trump’s next wave of tariffs, which are expected to take effect on April 2 — dubbed “Liberation Day.” Trump’s plan includes “reciprocal tariffs” on trading partners, including 25% duties on auto imports, raising fears of retaliation and economic fallout.

AI and Energy Stocks Offer Modest Support

While most sectors fell, stocks in the artificial intelligence and energy space helped cushion the decline.

Super Micro Computer rose 1.1%, continuing its run as a key AI infrastructure play.
Constellation Energy and Vistra gained 2% and 1.4%, respectively, amid expectations of increased energy demand for AI data centers.
Nvidia, the poster child of the AI rally, edged up 0.1%.

Though AI stocks have been a target for valuation concerns in recent weeks, some analysts argue that the pullback has made them more reasonably priced relative to the broader market.

Global Markets Rattled by Tariff and Earthquake News

Overseas markets were also jittery. In Asia, automakers took a hit after Trump announced a 25% tariff on imported cars, sparking investor concern in Japan and South Korea:

Toyota Motor fell 2.8%
Honda dropped 2.6%
Hyundai Motor slid 2.6%

In Thailand, the SET index fell 1% after a powerful earthquake centered in neighboring Myanmar prompted a state of emergency in Bangkok, adding regional geopolitical risk to an already tense global landscape.

Bond Market Reflects Caution

In the bond market, yields fell as investors sought safety. The 10-year Treasury yield dropped to 4.29% from 4.38% on Thursday, signaling growing skepticism about the economic outlook and bets that rate cuts may be delayed further.

As markets close out the week, sentiment remains fragile. Tariff uncertainty, high inflation, and signs of weakening consumer resilience continue to cloud the near-term economic picture.