On Friday, the US stock market experienced a significant downturn as investors grappled with a confluence of economic headwinds. The Dow Jones Industrial Average tumbled 716 points, closing 1.7% lower. The S&P 500 fell 1.97%, and the Nasdaq Composite slid 2.7%. This decline marked a challenging week for the market, with all three major indexes ending in the red. The S&P 500 is now down more than 5% for the year, on track for its first losing quarter since September 2023 and its worst quarter since September 2022.

Inflation Data: A Persistent Concern

The Commerce Department’s data revealed that inflation remained slightly sticky in February. The Personal Consumption Expenditures (PCE) index rose 2.5% year-over-year, unchanged from January and in line with expectations. However, the core PCE index, which excludes volatile categories like food and energy, ticked up to 2.8% year-over-year from 2.7% in January. This hotter-than-expected rise signals that inflation, while broadly cooling, remains above the Federal Reserve’s target of 2%.

Consumer Sentiment: A Sharp Decline

Consumer sentiment took a significant hit, with the University of Michigan’s latest survey showing a 12% drop this month. This decline was attributed to President Trump’s erratic trade war, which has sown uncertainty and anxiety among consumers. Notably, two-thirds of consumers now expect unemployment to rise in the year ahead, the highest reading since 2009. This sentiment is further exacerbated by the anticipation of higher prices due to tariffs, which are expected to impact consumer spending habits.

Tariffs: The Elephant in the Room

The announcement of new tariffs has added to the market’s woes. President Trump’s decision to impose a 25% tariff on all cars imported into the US, set to take effect on April 3, has stoked fears of further economic disruption. Additionally, tariffs on car parts like engines and transmissions, set to take effect no later than May 3, have heightened investor anxiety. These measures are expected to increase consumer prices and drag on economic growth.

Market Reactions: A Broad Selloff

The selloff on Friday was widespread, with stocks in technology, autos, and airlines taking a significant hit. Google slid 4.9%, Stellantis fell 4%, and Delta Air Lines dropped 5%. Lululemon’s stock tumbled 14% after the company flagged concerns about consumer spending. The poor debut of CoreWeave, an AI venture backed by Nvidia, on the Nasdaq further underscored the market’s unease. CoreWeave’s IPO price of $40 was below its target range, and the stock began trading at $39, highlighting cooling enthusiasm for AI investments.

Safe-Haven Assets: A Surge in Gold

Amid the economic turmoil, investors sought refuge in safe-haven assets. The yield on the 10-year Treasury note fell to 4.26% as investors snapped up government bonds. The Cboe Volatility Index (VIX), Wall Street’s fear gauge, surged 16%, and the Fear and Greed Index ticked into “extreme fear” territory. Meanwhile, gold futures surged above a record high of $3,100, with Goldman Sachs revising its year-end target for gold prices to $3,300, up from $3,100. This underscores the ongoing appeal of gold as a hedge against inflation and economic uncertainty.

Market Outlook: Downward Revisions

The continued uncertainty surrounding tariffs and inflation has led to downward revisions in Wall Street’s expectations for US stocks. Analysts at UBS trimmed their year-end target for the S&P 500 to 6,400 from 6,600, while Barclays lowered their target to 5,900 from 6,600. Goldman Sachs also revised its year-end target to 6,200 from 6,500. These adjustments reflect growing concerns about the impact of tariffs and inflation on corporate earnings and consumer spending.

Navigating the Storm

The US stock market is navigating a perfect storm of economic challenges. The combination of stubborn inflation, weakening consumer sentiment, and the looming threat of tariffs has created an environment of heightened uncertainty. Investors are increasingly cautious, and the market’s outlook remains clouded by these persistent headwinds. As policymakers continue to grapple with these issues, the resilience of the US economy will be put to the test.