US stocks tanked on Friday as Wall Street grappled with President Trump’s escalating trade war and weighed signs of reinvigorated inflation pressures amid souring consumer sentiment.
The Dow Jones Industrial Average (^DJI) dropped more than 700 points or nearly 1.7%, while the benchmark S&P 500 (^GSPC) fell almost 2%. The Nasdaq Composite (^IXIC) dropped 2.7% as tech stocks led the declines.
The major averages fell on Friday after the release of a hotter-than-expected Personal Consumption Expenditures index reading, which includes the Federal Reserve’s preferred inflation gauge of “core” PCE. The reading showed prices increased more than expected last month, rising 0.4% month over month and 2.8% year over year, continuing a stubborn plateau on the path to the Fed’s 2% target.
Meanwhile, US consumer sentiment in March plummeted to its lowest level since November 2022. The latest reading from the University of Michigan came in at 57, down from a 64.7 reading in the prior month, as consumers fretted about inflation and the broader economy, perhaps most notably in the labor market.
On Friday President Trump said he had a “very good talk” with Canadian Prime Minister Mark Carney, his first conversation with him since Carney was elected earlier this month. When asked about tariffs however, the president said he will “absolutely” follow through with levies against the country.
Stocks have had a roller coaster week, starting off on a high on hopes that Trump would temper his tariff plans and then abruptly diving beginning on Wednesday upon news of new duties on auto imports.
Markets continued to slide Thursday as Wall Street digested Trump’s 25% levies on foreign cars along with more hawkish comments on what lies ahead in the trade war. April 2, the date when broad reciprocal tariffs are set to take effect, is looming large.
Fed officials have projected higher inflation and slower economic growth amid new tariffs, though Fed Chair Jerome Powell has reassured Wall Street that rising prices will likely be “transitory.”
But Powell’s words are fading into the background as Trump’s trade war escalates and more Fed officials say they aren’t exactly sure where the economy goes next, with one policymaker describing the situation as “zero visibility” in a “dense fog.”
The Federal Reserve Bank of Atlanta’s GDPNow index now forecasts that US gross domestic product (GDP) will fall 2.8% in the first quarter, compared to a previous projection of a 1.8% decline released two days ago.
