Stocks tumbled on Friday as new economic data raised alarms about a deceleration in the U.S. economy and persistent inflation, prompting investors to seek safer investment options. The market’s downturn intensified as fears grew over potential volatility stemming from the Trump administration’s recent policy changes, including proposed tariffs.
The Dow Jones Industrial Average experienced a significant drop, falling 748.63 points, or 1.69%, to end at 43,428.02. This marked the index’s largest decline of the year, contributing to a two-day loss of nearly 1,200 points. Similarly, the S&P 500 declined by 1.71% to close at 6,013.13 following its recent record high earlier in the week. The tech-heavy Nasdaq Composite took the brunt of the decline, plummeting 2.2% to 19,524.01.
The drop was underscored by a range of economic indicators that raised concerns among investors. The University of Michigan consumer sentiment index dipped to 64.7 in February, a decline of nearly 10% that surpassed expectations. This downturn reflects worries about advancing inflation due to anticipated tariffs, with the inflation outlook for the next five years reaching 3.5%, a peak not seen since 1995. Additionally, existing home sales dropped to 4.08 million units, exceeding forecasts, and the U.S. services purchasing managers’ index fell into contraction for February, as reported by S&P Global.
Major corporations like Walmart saw their stock price decrease by 2.5%, following a weaker-than-expected earnings forecast that negatively impacted perceptions of the consumer market and the economy. Prominent investor Steve Cohen highlighted his apprehensions regarding the market’s trajectory, suggesting that the best gains may already be realized and predicting a potential significant correction as tariff effects and government spending cuts weigh on growth.
As investors pivoted toward traditionally safer assets, high-flying stocks such as Nvidia and Palantir faced notable declines. Conversely, defensive stocks performed well, with Procter & Gamble rising by 1.8%, and both General Mills and Kraft Heinz advancing by over 3%.
For the week, the S&P 500 declined by approximately 1.7%, while both the Dow and the Nasdaq recorded losses of about 2.5%. Analysts noted a distinct shift toward defensive sectors, including consumer staples, utilities, and healthcare, indicating caution among investors amid economic uncertainty.
Despite the volatility, this shift into defensive stocks suggests that investors are strategically positioning themselves to mitigate risks in an unpredictable environment. While recent trends may be unsettling, they also highlight a market looking to adapt and protect itself against potential downturns.