Wall Street is heading towards the end of its worst month since April, with U.S. stock indexes showing mixed results following an economic report that presented both positive and negative trends.
The S&P 500 dropped by 0.1% in early trading. It has declined in five of the past six days, which erased its earlier gains for the year. This dip comes after weaker-than-expected economic data and concerns over President Donald Trump’s tariffs, which pushed the index down from its record high set last week.
The Dow Jones Industrial Average saw a modest increase, up 51 points, or 0.1%, by 9:35 a.m. Eastern time, while the Nasdaq composite fell by 0.5%.
Much of the market’s decline has been concentrated on sectors that had been among the biggest winners in recent years. Stocks, particularly those tied to artificial intelligence technology, have experienced sharp drops. For instance, Nvidia saw a 1.1% decrease, adding to its 8.5% fall on Thursday. Bitcoin has also suffered, losing more than 20% from its peak.
The most recent U.S. economic report, released on Friday, brought some positive news for the market. Inflation in the country slowed slightly, aligning closely with the expectations of economists, according to the measure that the Federal Reserve favors.
The report also revealed that U.S. households reduced their spending in January, which is concerning for an economy that has heavily relied on strong consumer spending to avoid a recession.
Consumers have already shown signs of financial strain and concern. While inflation is no longer as high as its peak in 2022, it remains a significant issue. There are growing fears that tariffs imposed by Trump could further drive up the cost of living.
Wall Street remains hopeful that the discussions around tariffs are primarily a negotiating tactic, and that Trump may eventually ease them. If so, this could result in less harm to the global economy than initially feared.
Even if the tariff situation resolves as some hope, recent reports show that the discussions around tariffs have already caused U.S. consumers to prepare for much higher inflation in the future. This growing concern could influence their behavior, potentially harming the economy even without the tariffs themselves.
The uncertainty surrounding not just tariffs but also deregulation and other possible policy changes could undermine market confidence. As noted by Bank of America economists in a report, if the market perceives that Trump is not moving toward more market-friendly policies, trust in the economy could continue to erode.
The S&P 500 has already lost most of the gains it saw after Trump’s election in November.
While some of January’s decline in consumer spending—the worst in four years—may have been due to unusually cold weather and other temporary factors, it also comes after signals of potentially weaker growth in the U.S. economy. Despite ending 2024 on a strong note, there are concerns about the future.
Gary Schlossberg, a market strategist at Wells Fargo Investment Institute, noted that the sharp drop in consumer spending at the start of the year, though possibly exaggerated by a strong finish to 2024, aligns with other data suggesting the economy may be shifting to a more sustainable growth path.
In the bond market, Treasury yields slightly decreased. The yield on the 10-year Treasury dropped to 4.24% from 4.26% on Thursday. This marks a significant decline from last month, when it was nearing 4.80%, as concerns about the future direction of the U.S. economy have increased.
International stock markets also experienced significant declines, particularly in Asia, driven by ongoing concerns about tariffs.
China’s Commerce Ministry issued a statement on Friday criticizing President Trump’s decision to double tariffs on Chinese goods to 20%. The ministry argued that the move violated international trade rules, would increase the burden on American companies and consumers, and destabilize the global supply chain.
As a result, indexes fell sharply: Hong Kong dropped by 3.3%, Shanghai by 2%, Seoul by 3.4%, and Tokyo by 2.9%.