Wall Street tumbles, and S&P 500 drops 2% on worries about slower economy and higher inflation
By: Stan Choe (Associated Press)
The sky is falling! Run for the hills! The DOW has fallen back to where it was 6 months ago, OMG. The DOW is only 21,000 above the COVID pandemic low. And it's all Trump's fault. What will we do?
S E E D E D C O N T E N T
NEW YORK (AP) — Another wipeout walloped Wall Street Friday. Worries are building about a potentially toxic mix of worsening inflation and a U.S. economy slowing because of households afraid to spend due to the global trade war.
The S&P 500 dropped 2% for one of its worst days in the last two years. It thudded to its fifth losing week in the last six after wiping out what had been a big gain to start the week.
The Dow Jones Industrial Average sank 715 points, or 1.7%, and the Nasdaq composite fell 2.7%.
Lululemon Athletica led the market lower with a drop of 14.2%, even though the seller of athletic apparel reported a stronger profit for the latest quarter than analysts expected. It warned that its revenue growth may slow this upcoming year, in part because “consumers are spending less due to increased concerns about inflation and the economy,” said CEO Calvin McDonald.
Oxford Industries, the company behind the Tommy Bahama and Lilly Pulitzer brands, likewise reported stronger results for the latest quarter than expected but still saw its stock fall 5.7%. CEO Tom Chubb said it saw a “deterioration in consumer sentiment that also weighed on demand” beginning in January, which accelerated into February.
They’re discouraging data points when one of the main worries hitting Wall Street is that President Donald Trump’s escalating tariffs may cause U.S. households and businesses to freeze their spending. Even if the tariffs end up being less painful than feared, all the uncertainty may filter into changed behaviors that hurt the economy.
A report on Friday showed all types of U.S. consumers are getting more pessimistic about their future finances. Two out of three expect unemployment to worsen in the year ahead, according to a survey by the University of Michigan. That’s the highest reading since 2009, and it raises worries about a job market that’s been a linchpin keeping the U.S. economy solid.
A separate report also raised concerns after it showed a widely followed, underlying measure of inflation was a touch worse last month than economists expected. It followed reports on other measures of inflation for February, but this is the one the Federal Reserve pays the most attention to as it decides what to do with interest rates.
The report also showed that an underlying measure of how much income Americans are making, which excludes government social benefits and some other items, “has been treading water for the last three months,” said Brian Jacobsen, chief economist at Annex Wealth Management.
“Households aren’t in a good place to absorb a little tariff pain,” he said. “The Fed isn’t likely to run to the rescue either as inflation moved up more than expected in February.”
The Fed could return to cutting interest rates, like it was doing late last year, in order to give the economy and financial markets a boost. But such cuts would also push upward on inflation, which has been sticking above the Fed’s 2% target.
The economy and job market have been holding up so far, but if they were to weaken while inflation stays high, it would produce a worst-case scenario called “stagflation.” Policy makers in Washington have few good tools to fix it.
Some of Wall Street’s sharpest losses on Friday hit companies that need customers feeling confident enough to spend, and not just on yoga wear or beach clothes. Delta Air Lines lost 5%. Casino operator Caesars Entertainment dropped 5%. Domino’s Pizza sank 5.1%.
The heaviest weights on the market were Apple, Microsoft and other Big Tech stocks, whose massive sizes give their movements more sway over indexes. They and other stocks that had gotten caught up in the frenzy around artificial-intelligence technology have been among the hardest hit in Wall Street’s recent sell-off.
Their prices had shot up so much more quickly than their already fast-growing revenues and profits that critics said they looked too expensive. CoreWeave, whose cloud platform helps customers manage complex AI infrastructure, was flat in its first day of trading on the Nasdaq.
On the flip side, among the relatively few rising stocks on Wall Street were those that can make money almost regardless of what the economy does, such as utilities. American Water Works rose 2.2%.
All told, the S&P 500 fell 112.37 points to 5,580.94. The Dow Jones Industrial Average dropped 715.80 to 41,583.90, and the Nasdaq composite lost 481.04 to 17,322.99.
Stock markets worldwide will likely remain shaky as an April 2 deadline approaches for more tariffs. That’s what Trump has called “Liberation Day,” when he will roll out tariffs tailored to each of the United States’ trading partners.
In stock markets abroad, indexes fell sharply in Japan and South Korea as automakers felt more pressure following Trump’s announcement that he plans to impose 25% tariffs on auto imports. Hyundai Motor fell 2.6% in Seoul, while Honda Motor fell 2.6%, and Toyota Motor sank 2.8% in Tokyo.
Thailand’s SET lost 1% after a powerful earthquake centered in Myanmar rattled the region, causing the prime minister to declare a state of emergency for the capital, Bangkok.
In the bond market, the yield on the 10-year Treasury tumbled to 4.25% from 4.38% late Thursday. It tends to fall when expectations for either U.S. economic growth or inflation are on the wane.
AP Writers Jiang Junzhe and Matt Ott contributed.
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The COVID pandemic triggered a DOW drop of more than 35 pct. A 2 pct fall from politically motivated all-time record highs is nothing. What we should have learned by now is that the DOW functions outside the economy. The DOW provides as much insight into the health and stability of the economy as does the price of Bitcoin. It's a fake economy running on fake money.
Who wouldn't want to return to the pre-pandemic economy? Way back then (5 years ago) we had cheaper food prices, more affordable housing, and our only worry was climate change. We can all see how the DOW responded to inflation -- stock investors loved it. Why would it be so awful to wipe out that inflation driven stock surge?
The issue is that Trump caused this. And from what we can see, matters will simply grow worse.
Bullshit.
This has been brewing for years. Long before Trump got elected. We are going into at least the third year of a bull market. A savvy investor should have been moving out of equities long before Trump got elected and into less volatile cash equivalents, bonds, etc.
Two months of Trump hasn’t caused all of this. Not even close.
Blind denial of the obvious. Trump triggered the market negativity with his stupid tariffs. The market fundamentals have been sound. Earnings were sound. What is different is that the market has been factoring in the uncertainty of Trump, the clear damage the tariffs will do to the economy, the trade wars and the uncertainty of same, bad international relationships, chaotic cut in government services, etc.
Instead of seeing the obvious you leap to the clouds and offer the simplistic bullshit that a bull market will eventually turn. And on top of that, you claim to be able to time this turn. Ridiculous.
In short, you just delivered a pile of bullshit:
lol …. As usual …. I stand by everything I’ve said and almost nothing you’ve said.
Keeping pushing triggered bullshit .
Yet again you monotonously repeat a favorite platitude rather than make an actual argument (or a rebuttal).
No rebuttal required when the point is already made. And off you go again with your thinly veiled insults. A sure sign of a debate failure.
Every time ….
First of all, is what Trump supposedly caused significant? The DOW nearly doubled in value over the last 5 years. Beside the obvious impacts of the COVID pandemic, over the last five years we've experienced 20 pct inflation, a student debt crisis, shifts in population from the north to south, and growing disparities in income, wealth, health, and lifestyles. Four years ago the DOW valuation was about 31,000. We should expect the DOW to be at 37,500 today just to keep up with inflation over the last four years.
Secondly, how did Trump cause this? Trump imposed a tax increase onto corporate America. And that's about all that Trump has done. Unlike typical tax increases, Trump's use of tariffs only increase taxes on businesses who import rather than manufacture. Trump's tax provides preferential treatment for domestic produces. But that fact seems to have gone over the heads of stock investors.
Trump is taking steps to lower the cost of government. By spending less, the Federal government should be competing for less of the productive output of the US economy. Since the United States is not a Socialist or Communist economy, less government competition should allow more capital investment in productive activities.
Trump really isn't doing anything his predecessors haven't done. The Inflation Reduction Act used taxes and government spending to address political priorities. And that's all Trump is really doing.
So you recognize that the stock market has been healthy and growing. But you somehow forgot that COVID-19 did indeed seriously hurt the market.
And then you incorrectly dismiss all that Trump has done as merely a tax increase on corporate America. It is in effect a consumption tax. The market correctly recognizes that this will hurt earnings.
Anyone can lower cost of operations by simply cutting off parts of the entity. In a typical business, one can simply fire the Marketing staff. There you go, costs cut. There are well understood methods for trimming fat and fraud. Hacking off limbs is not the way to go.
Yeah, Nerm, nothing to see here. Trump is a normal president doing what presidents have done throughout history. Nothing special.
I pointed out that the COVID pandemic caused more than a 35 pct drop in the DOW. I also pointed out that the DOW has almost doubled in value from pre-pandemic highs over the last 5 years. The DOW has experienced tremendous growth in spite of the COVID pandemic.
I contend that the stock market's rapid growth in value has not been healthy. Artificial stimulus stands out as a primary cause of the DOW's rapid growth over the last 5 years. The DOW's performance has been detached from the real economy because of that artificial stimulus. A stock market reaction, positive or negative, won't provide any useful measure of the health and stability of the economy.
That's true, anyone can lower costs by cutting. But what is cut really does matter. What would be the expected result from cutting the production line to make more resources available for marketing? There really are zero-sum constraints that apply.
Is government more like a production line or more like marketing? Don't ignore that the government really does compete for skilled labor and revenue in the economy. Funding government really does require shifting resources away from private sector activities. That opens the Pandora's box of debate about the role of government.
What weight should be given to stock market performance in defining the role of government?
Should we doubt that a President Kamala Harris would be using taxes and government spending to achieve some sort of overarching goal? Would a President Harris be advocating for increasing corporate taxes across-the-board? Why wouldn't an across-the-board corporate tax increase be as ( or more) harmful for consumers?
Sarcasm won't hide (or absolve) how we got here.
1. He got many people fired who are now out of work.
Previously employed people, after they are out of work, cut back drastically on their spending, Which of course hurts businesses, )I'm surprised you didn't know that).
And it looks like this will continue.
2. He's only just begun with tariffs-- which makes things more expensive.
Trump, Musk, and DOGE aren't coming close to the 300,000 Clinton put out of work when reinventing government. What Trump is doing is definitely not unprecedented.
The question becomes what effect the government workers being fired had on the economy? If the jobs of those government workers was to impede the private sector then why wouldn't removing those impediments improve the broader economy? If the jobs of those government workers being fired was to favor foreign economic development and foreign job creation at the expense of the United States, then why wouldn't eliminating that favoritism toward foreign economies prove beneficial to the United States?
We really have observed that foreign trade comes with zero-sum constraints. Free Trade doesn't provide everyone a piece of prosperity. Free Trade has allowed the rich to circumvent labor laws, taxes, and most other concerns that may compete with naked greed. There's little danger of confusing the attitudes of the very affluent with saintly social activism.
Why should US consumers be so devoted to ensuring the rich become richer without obligation to the United States? Don't complain about the rich rat basturds and then argue for preferential treatment on their behalf.
Trump did cause some of the issue with his ever-changing tariff declarations. This article spells it out quite well and the forecast at the end of it is that a bull market is unlikely. It explains why. Of course nobody can predict the future 100% of the time so all we can really do is wait it out.
Will This Stock Market Correction Turn Into a Full-Fledged Bear Market? Here's What 80 Years of History Tell Us.
The article stated that the likelihood of a bear market is low. That, IMO, depends on how long Trump continues with his tariff insanity. The longer this continues, the longer it will take to recover. Further there is a permanence that sets in. We cannot, for example, return to our pre-Trump good relationship with Canada. This condition can grow worse and more permanent with time. We are still at the inception where the pain is academic; we have not even felt the real pain of these tariffs.
A bear market can easily emerge if consumer confidence is low and earnings start to suck. Trump, more than any other factor, is pushing us down.
Correct, I meant bear but typed bull. As it stated, nobody can predict 100% of the time so all we can do is wait. But the market likes stability and certainty and the back & forth with tariff's is not allowing the market to be calm. Time will tell.