US Stock Indices Decline Amid Economic Concerns and Tariff Woes

The S&P 500 Index ($SPX) (SPY) closed down -1.97% on Friday, alongside the Dow Jones Industrials Index ($DOWI) (DIA) which fell -1.69%, and the Nasdaq 100 Index ($IUXX) (QQQ) which declined by -2.61%. Futures for June E-mini S&P (ESM25) dropped -2.18%, while June E-mini Nasdaq futures (NQM25) fell -2.89%.

Stock indexes experienced a significant decline, with the S&P 500 and Nasdaq 100 reaching two-week lows, and the Dow Jones Industrials dipping to a one-week low. Anxiety over the economic impact of tariffs led to decreased stock prices and bond yields, contributing to gold reaching an all-time high. Economic data released on Friday indicated weaker-than-expected household demand, coupled with signs of persistent inflation, following reports of February personal spending rising less than anticipated and the core PCE price index increasing more than expected, which is the Federal Reserve’s preferred inflation measure.

Consumer Sentiment and Market Response

The University of Michigan’s report highlighted a downgrade in consumer sentiment, reaching a 2-1/3 year low and indicating rising inflation expectations. Leading the market’s decline were the so-called Magnificent Seven stocks, semiconductor manufacturers, and travel-related companies. According to Bank of America, EPFR Global data revealed that U.S. stocks faced $20.3 billion in outflows during the week ending March 26, marking the largest weekly outflow this year.

Comments from Federal Reserve officials on Thursday reinforced bearish market sentiment. Boston Fed President Collins stated that tariffs are likely to increase inflation in the near term, perceiving an “inevitable” impact. Likewise, Richmond Fed President Barkin noted that rapid changes to U.S. trade policies have fostered “a sense of instability” within the business community, potentially dampening demand.

Contrastingly, San Francisco Fed President Daly’s comments on Friday were more dovish. She suggested that the Fed has time to evaluate the effects of tariffs on the economy and described two expected 25 basis point interest rate cuts this year as a “reasonable” outlook.

Economic Indicators and Inflation Data

February personal spending displayed an increase of +0.4% month-over-month, slightly below expectations of +0.5%. Personal income, however, rose by +0.8% month-over-month, exceeding expectations of +0.4% and marking the largest increase in 13 months.

Additionally, the February core PCE price index increased by +0.4% month-over-month and +2.8% year-over-year, surpassing expectations of +0.3% and +2.7%, respectively. The University of Michigan’s consumer sentiment index for March was revised down by -0.9 to a two-and-a-half-year low of 57.0, which was weaker than the expected no change at 57.9. Meanwhile, the March 1-year inflation expectations rose to a two-and-a-half-year high of +5.0%, and the 5-10 year inflation expectations indicator was adjusted upward to a 32-year high of 4.1% year-over-year, above the expected 3.9%.

Market pressures stem from apprehensions that U.S. tariffs may hinder economic growth and corporate profits. Recently imposed tariffs by President Trump, including a 25% increase on Canadian and Mexican goods and a doubling of Chinese tariffs from 10% to 20%, have raised concerns. Following additional statements about potential new tariffs, the situation has led to significant market uncertainty.

Interest Rate Projections and International Markets

Currently, the market assigns a 21% probability of a -25 basis point rate cut following the FOMC meeting on May 6-7. Overseas markets reflected similar declines, with the Euro Stoxx 50 dropping to a two-week low and closing down -0.92%. China’s Shanghai Composite Index fell by -0.67%, while Japan’s Nikkei Stock 225 also dropped to a two-week low, closing down -1.80%.

Interest Rates

June 10-year T-notes (ZNM25) finished higher, closing up +25 ticks, while the 10-year T-note yield decreased by -9.9 basis points to 4.261%. The rally in T-notes was supported by gains in German bunds and eased market supply following recent Treasury auctions. The downturn in stocks and inflation-related data contributing to downward revisions in consumer sentiment also supported T-note gains.

Friday’s economic news provided mixed signals for T-notes; despite February personal spending being lower than expected, the core PCE inflation index was stronger than anticipated.

European bond yields similarly fell, with the 10-year German bund yield slipping to a three-week low of 2.707% before closing down -4.6 basis points at 2.727%. The 10-year UK gilt yield decreased by -8.9 basis points to 4.694%.

The Eurozone’s March economic confidence index unexpectedly declined by -1.1 to 95.2, below the forecast of an increase to 96.7. Meanwhile, the ECB’s February 1-year inflation expectations remained unchanged at 2.6%, slightly stronger than the expected 2.5%. Additionally, Germany’s March unemployment rose by +26,000, indicating a weaker labor market compared to the projected +10,000 increase, leading to a rise in the unemployment rate to a 4-1/2-year high of 6.3%.

Swaps currently suggest an 85% probability of a -25 basis point rate cut by the ECB in the upcoming policy meeting on April 17.

U.S. Stock Movers

The selloff in Magnificent Seven stocks adversely affected the broader market on Friday. Amazon.com (AMZN) led the losses within the Dow Jones Industrials, closing down more than -4%. Alphabet (GOOGL) and Meta Platforms (META) also fell over -4%. Other notable declines included Tesla (TSLA) and Microsoft (MSFT) taking losses greater than -3%, while Apple (AAPL) and Nvidia (NVDA) closed down more than -2% and -1%, respectively.

Chip makers were significantly impacted, with ON Semiconductor (ON) down over -6% and NXP Semiconductors NV (NXPI) closing down more than -5%. Additional declines in the sector included Microchip Technology (MCHP), KLA Corp (KLAC), and Marvell Technology (MRVL), each closing down more than -4%. Other heavyweights like Intel (INTC), Analog Devices (ADI), Advanced Micro Devices (AMD), GlobalFoundries (GFS), Micron Technology (MU), Lam Research (LRCX), and Qualcomm (QCOM) also experienced losses exceeding -3%.

Moreover, Lululemon Athletica (LULU) fell more than -14% after forecasting 2026 net revenue of $11.15 billion to $11.30 billion, which fell short of the consensus estimate of $11.31 billion.

Lastly, fears about economic conditions negatively impacted travel and hotel stocks, notably affecting Delta Air Lines (DAL), Las Vegas Sands (LVS), and Royal Caribbean Cruises Ltd (RCL).