Stocks fell sharply on Friday – with the Dow Jones Industrial Average down over 700 points, or 1.7% to 41,584 – the Standard & Poor’s 500 Index shed 2% to 5,581(now having declined five of the last six weeks) – while the NASDAQ Composite tumbled 2.7% to 17,323. The Friday decline turned what had a good chance to be a winning week into another losing week. For the week in total, the Dow lost 1%, the S&P dropped 1.5% and the NASDAQ fell 2.6%. Both the S&P and NASDAQ have now fallen for seven out of the last nine weeks.
The stock market is facing multiple headwinds. For starters, consumer sentiment is weakening, as shown by the latest reading from the University of Michigan’s Surveys of Consumers, which also showed inflation expectations are increasing. Inflation is still a problem and above the Federal Reserve’s target rate. The Fed’s preferred read on inflation, the core Personal Consumption Expenditures price index, came in a notch higher-than-expected last week. Additionally, the market is becoming more and more worried about economic growth and whether corporate earnings will hold up. Last but certainly not least, the market does not like the uncertainty and possible implications surrounding tariffs.
President Trump announced a 25% tariff last week on all cars that are not made in the United States. Investors are further jittery over “Liberation Day” coming up this week, expected on Wednesday, when several additional tariffs are planned to be rolled out by the administration. It is often said that the stock market climbs a wall of worry. Currently, however, the market is doing more worrying than it is climbing. With the above concerns, the three major stock market averages are all on pace to post steep monthly declines.
The Bulls are hoping for items such as tax cuts, deregulation, and interest rate cuts by the Federal Reserve to all come through and turn things around. Before that, however, in addition to watching tariff news this week, investors will be eyeing the all-important Jobs Report scheduled to be released by the U.S. Bureau of Labor Statistics Friday morning. Consensus expectations are the economy added 138,000 jobs and the unemployment rate remained unchanged at 4.1 percent. After that, investors will be eyeing another earnings season which is about to get underway.
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