Wall Street tumbles, and S&P 500 drops 2% on worries about slower
economy and higher inflation
[March 29, 2025] By
STAN CHOE
NEW YORK (AP) — Another wipeout walloped Wall Street Friday. Worries are
building about a potentially toxic mix of worsening inflation and a U.S.
economy slowing because of households afraid to spend due to the global
trade war.
The S&P 500 dropped 2% for one of its worst days in the last two years.
It thudded to its fifth losing week in the last six after wiping out
what had been a big gain to start the week.
The Dow Jones Industrial Average sank 715 points, or 1.7%, and the
Nasdaq composite fell 2.7%.
Lululemon Athletica led the market lower with a drop of 14.2%, even
though the seller of athletic apparel reported a stronger profit for the
latest quarter than analysts expected. It warned that its revenue growth
may slow this upcoming year, in part because “consumers are spending
less due to increased concerns about inflation and the economy,” said
CEO Calvin McDonald.
Oxford Industries, the company behind the Tommy Bahama and Lilly
Pulitzer brands, likewise reported stronger results for the latest
quarter than expected but still saw its stock fall 5.7%. CEO Tom Chubb
said it saw a “deterioration in consumer sentiment that also weighed on
demand” beginning in January, which accelerated into February.
They’re discouraging data points when one of the main worries hitting
Wall Street is that President Donald Trump’s escalating tariffs may
cause U.S. households and businesses to freeze their spending. Even if
the tariffs end up being less painful than feared, all the uncertainty
may filter into changed behaviors that hurt the economy.
A report on Friday showed all types of U.S. consumers are getting more
pessimistic about their future finances. Two out of three expect
unemployment to worsen in the year ahead, according to a survey by the
University of Michigan. That’s the highest reading since 2009, and it
raises worries about a job market that’s been a linchpin keeping the
U.S. economy solid.
A separate report also raised concerns after it showed a widely
followed, underlying measure of inflation was a touch worse last month
than economists expected. It followed reports on other measures of
inflation for February, but this is the one the Federal Reserve pays the
most attention to as it decides what to do with interest rates.
The report also showed that an underlying measure of how much income
Americans are making, which excludes government social benefits and some
other items, “has been treading water for the last three months,” said
Brian Jacobsen, chief economist at Annex Wealth Management.
“Households aren’t in a good place to absorb a little tariff pain,” he
said. “The Fed isn’t likely to run to the rescue either as inflation
moved up more than expected in February.”
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 The Fed could return to cutting
interest rates, like it was doing late last year, in order to give
the economy and financial markets a boost. But such cuts would also
push upward on inflation, which has been sticking above the Fed’s 2%
target.
The economy and job market have been holding up so far, but if they
were to weaken while inflation stays high, it would produce a
worst-case scenario called “stagflation.” Policy makers in
Washington have few good tools to fix it.
Some of Wall Street’s sharpest losses on Friday hit companies that
need customers feeling confident enough to spend, and not just on
yoga wear or beach clothes. Delta Air Lines lost 5%. Casino operator
Caesars Entertainment dropped 5%. Domino’s Pizza sank 5.1%.
The heaviest weights on the market were Apple, Microsoft and other
Big Tech stocks, whose massive sizes give their movements more sway
over indexes. They and other stocks that had gotten caught up in the
frenzy around artificial-intelligence technology have been among the
hardest hit in Wall Street’s recent sell-off.
Their prices had shot up so much more quickly than their already
fast-growing revenues and profits that critics said they looked too
expensive. CoreWeave, whose cloud platform helps customers manage
complex AI infrastructure, was flat in its first day of trading on
the Nasdaq.
On the flip side, among the relatively few rising stocks on Wall
Street were those that can make money almost regardless of what the
economy does, such as utilities. American Water Works rose 2.2%.
All told, the S&P 500 fell 112.37 points to 5,580.94. The Dow Jones
Industrial Average dropped 715.80 to 41,583.90, and the Nasdaq
composite lost 481.04 to 17,322.99.
Stock markets worldwide will likely remain shaky as an April 2
deadline approaches for more tariffs. That’s what Trump has called
“Liberation Day,” when he will roll out tariffs tailored to each of
the United States’ trading partners.
In stock markets abroad, indexes fell sharply in Japan and South
Korea as automakers felt more pressure following Trump’s
announcement that he plans to impose 25% tariffs on auto imports.
Hyundai Motor fell 2.6% in Seoul, while Honda Motor fell 2.6%, and
Toyota Motor sank 2.8% in Tokyo.
Thailand’s SET lost 1% after a powerful earthquake centered in
Myanmar rattled the region, causing the prime minister to declare a
state of emergency for the capital, Bangkok.
In the bond market, the yield on the 10-year Treasury tumbled to
4.25% from 4.38% late Thursday. It tends to fall when expectations
for either U.S. economic growth or inflation are on the wane.
___
AP Writers Jiang Junzhe and Matt Ott contributed.
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