U.S. stock indexes are dropping on Friday following reports that could dampen optimism about inflation and consumer spending.
As of 9:55 a.m. Eastern time, the S&P 500 had fallen by 0.5%, potentially undoing the gains made earlier in the week. If this trend continues, it would mark the fifth week of losses in the last six for the index.
The Dow Jones Industrial Average dropped by 263 points, or 0.6%, while the Nasdaq composite saw a decline of 0.7%.
Lululemon Athletica saw a significant drop, falling by 13.3%, despite reporting a stronger-than-expected profit for the last quarter. However, the company warned that its revenue growth may slow down in the coming year. CEO Calvin McDonald attributed this to a decline in consumer spending, partly due to growing concerns about inflation and the broader economy.
Lululemon also mentioned that tariffs and fluctuating foreign-currency values could contribute to about half of its anticipated drop in a key performance metric: the profit it generates from each dollar of revenue.
Similarly, Oxford Industries, the parent company of brands like Tommy Bahama and Lilly Pulitzer, reported better-than-expected results for the latest quarter. However, its stock still dropped by 3.3%. CEO Tom Chubb noted a decline in consumer sentiment that began in January and worsened in February, which negatively impacted demand.
The data is concerning, especially as one of the major concerns on Wall Street is that President Donald Trump’s trade war could lead U.S. households and businesses to cut back on spending. Even if the tariffs turn out to be less damaging than anticipated, the ongoing uncertainty could still lead to changes in behavior that harm the economy.
Additionally, a report released in the morning added to worries, showing that a key inflation measure came in slightly worse than economists had expected for the previous month. This data follows other reports on inflation but is particularly significant because it’s the measure the Federal Reserve watches most closely when making decisions about interest rates.
The report also revealed that a key measure of Americans’ income, which excludes government benefits and certain other factors, has been stagnant for the past three months, according to Brian Jacobsen, chief economist at Annex Wealth Management.
“Households aren’t in a good position to handle even a little pain from tariffs,” Jacobsen said. “And the Fed is unlikely to intervene quickly, especially with inflation rising more than expected in February.”
The Federal Reserve has kept its main interest rate steady this year after making significant cuts in late 2024, partly due to concerns over inflation staying above its 2% target. While further rate cuts could stimulate the economy and financial markets, they would also likely push inflation higher.
Stock markets around the world are expected to remain volatile as the April 2 deadline for more tariffs nears. This is what President Trump has called “Liberation Day,” when he plans to introduce tariffs aimed at the U.S.’s trading partners. He has said the tariffs will be “reciprocal,” matching the duties other countries impose on the U.S., including taxes like value-added taxes.
Despite broader market losses, some stocks in the artificial intelligence (AI) sector helped cushion the blow on Wall Street. Super Micro Computer, which sells servers used in AI, rose by 1.1%. Power companies supporting the development of large AI data centers also saw gains, with Vistra climbing 1.4% and Constellation Energy up 2%.
Nvidia, the chipmaker that has become a symbol of the AI boom, edged up 0.1%. AI stocks had been a focal point of Wall Street’s recent sell-off, as critics argued their prices had outpaced their already fast-growing profits, making them overly expensive. However, the recent declines have made these stocks appear less pricey compared to the broader U.S. market.
Meanwhile, international markets faced significant losses, particularly in Japan and South Korea, where automakers struggled following President Trump’s announcement of a planned 25% tariff on auto imports. In South Korea, Hyundai Motor dropped 2.6%, while in Japan, Honda Motor fell 2.6% and Toyota Motor slid 2.8%.
Thailand’s SET index dropped by 1% following a strong earthquake centered in Myanmar that shook the region. As a result, the Thai prime minister declared a state of emergency for the capital, Bangkok.
In the bond market, the yield on the 10-year Treasury note decreased to 4.29%, down from 4.38% on Thursday evening.
