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Dow drops 748 points on tariff concerns

Maggie Broochers
Tariff Concerns

Tariff Concerns

U.S. stocks tumbled on Friday as businesses and consumers expressed concerns about the impact of tariffs on the economy. The S&P 500 fell 1.7%, marking its worst day in two months. The Dow Jones Industrial Average dropped 748 points, or 1.7%, while the Nasdaq Composite sank 2.2%.

The losses accelerated throughout the day following several weaker-than-expected economic reports. One report suggested that U.S. growth had slowed to a 17-month low.

A preliminary survey from S&P Global indicated that activity unexpectedly shrank for U.S. services businesses, with many respondents reporting slumping optimism due to worries about government policies.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said, “Companies report widespread concerns about the impact of federal government policies, ranging from spending cuts to tariffs and geopolitical developments. Sales are reportedly being hit by the uncertainty caused by the changing political landscape, and prices are rising amid tariff-related price hikes from suppliers.”

Tariff concerns are also affecting consumer sentiment.

According to a survey by the University of Michigan, U.S. consumers are preparing for price hikes, partly due to tariffs on imports.

Consumers now expect prices to be 4.3% higher in 12 months, a significant increase from their forecast of 3.3% inflation last month. Another economic report revealed that sales of previously occupied homes were lower than expected last month, as higher mortgage rates and expensive home prices have been hurting sales. Despite the downturn, the U.S. stock market has shown resilience, still up for the year so far and not far from its record highs set earlier in the week.

tariff impact weighs on stocks

While no immediate recession forecasts are prevalent on Wall Street, Friday’s reports raise concerns about the economy’s strength. Stocks of smaller companies, particularly those whose profits are closely tied to the U.S. economy’s health, fell more than the broader market.

The Russell 2000 index of small stocks dropped a market-leading 2.9%. Within the S&P 500 index, 3 out of every 4 stocks fell. Tech stocks, airlines, and metals companies were significant losers.

Nvidia sank 4.1%, United Airlines lost 6.4%, and Newmont Mining fell 5.7%. Akamai Technologies experienced the sharpest drop in the S&P 500, losing 21.7% as investors focused on its revenue forecasts for the upcoming year, which fell short of expectations. Conversely, Celsius Holdings, which sells energy drinks, jumped 27.8% after announcing it would purchase Alani Nu, a beverage company focusing on female customers, for $1.65 billion net of tax effects.

Water utility American Water Works rose 3.1%, indicating interest in companies that provide steady profits irrespective of economic fluctuations. The Federal Reserve has kept its main interest rate steady after sharp cuts last year. Lower rates can boost the economy but also encourage spending that puts upward pressure on inflation.

Treasury yields fell in response to Friday’s economic reports, with the 10-year Treasury yield dropping to 4.42% from 4.51% late Thursday. In international stock markets, Europe saw mixed results, while Asia saw gains, notably in Hong Kong where the Hang Seng jumped 4%.

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