U.S. stock indices experienced a significant decline following disappointing economic data, with the S&P 500 and Nasdaq facing their largest weekly losses since January. Business activity has slowed, and consumer sentiment is pessimistic, leading to notable drops in sectors sensitive to economic performance. Major tech stocks fell sharply, and the CBOE volatility index rose, reflecting increased market uncertainty. Amid this, President Trump announced new tariffs, contributing to the bearish market sentiment.
U.S. Stock Indices Face Significant Decline
The three major U.S. stock indices faced a sharp downturn after the release of economic data, continuing their descent into the afternoon trading session.
All indices are poised to register weekly losses, with the S&P 500 and Nasdaq potentially experiencing their largest weekly decline since early January, while the Dow is on track for its biggest drop from one Friday to the next since mid-October.
Economic Indicators and Market Sentiment
The recent economic reports revealed a slowdown in business activities across the United States and a decline in consumer sentiment. Survey participants have voiced increasingly pessimistic views amid mounting economic uncertainties.
According to Chris Williamson, chief economist at S&P Global, American business optimism has significantly diminished in the face of ‘growing uncertainty.’ Michael Green, chief strategist at Simplify Asset Management, noted that the Michigan survey indicated a notable drop in sentiment, suggesting a potential market dip of 20% by the next trading day.
Sectors sensitive to economic performance, including Dow transports, technology chips, small-cap stocks, real estate, and discretionary spending, each fell by over 2%. Major tech stocks saw a 2.6% decline, with all but Apple among the ‘Magnificent 7’ witnessing losses exceeding 1%. Notably, Alphabet, Nvidia, Amazon, and Tesla saw drops ranging from 2.4% to 5.0%.
The CBOE volatility index surged to its highest level since February 4, indicating rising market uncertainty.
This week, U.S. President Donald Trump announced plans to implement new tariffs on lumber and forest products, alongside existing tariffs on imported cars, semiconductors, and pharmaceuticals.
The Dow Jones Industrial Average fell by 744.20 points, or 1.68%, closing at 43,432.45. The S&P 500 dropped 92.98 points, or 1.53%, to settle at 6,024.54, while the Nasdaq Composite decreased by 381.12 points, or 1.91%, ending at 19,581.24.
Among the 11 sectors in the S&P 500, all but consumer staples reported declines, with the discretionary consumption and industrial sectors experiencing the most significant losses.
The earnings season for the fourth quarter is nearing its end, with 425 S&P 500 companies having released their results. Among these, 76% surpassed Wall Street’s expectations, according to LSEG data.
Analysts are now projecting an overall earnings growth for the S&P 500 in the fourth quarter of 15.7% year-over-year, a notable increase from the earlier forecast of 7.8% as of January 1, according to LSEG.
Shares of UnitedHealth fell by 6.9% following reports of a Justice Department investigation into the health insurer’s Medicare billing practices. Block’s stock dropped by 17.9% after its fourth-quarter earnings fell short of expectations, while Akamai Technologies saw a 20.6% decline due to a forecast of 2025 annual revenue that was below analyst estimates.
Electric vehicle manufacturers Tesla and Rivian also faced losses of 4.9% and 4.0%, respectively, after announcing recalls.
On the NYSE, declining stocks outnumbered advancing ones by a ratio of 2.44 to 1, with 86 new highs and 94 new lows recorded. The Nasdaq reported 1,117 advancing stocks versus 3,216 declining stocks, marking a ratio of 2.88 to 1 against advances.
In the S&P 500, there were 18 new highs and seven new lows within the past 52 weeks, while the Nasdaq Composite noted 65 new highs and 113 new lows.