NEW YORK (AP) — U.S. stocks slumped as worries flared again on Wall Street about tariffs and inflation. The S&P 500 fell 0.9% Friday and wiped out what had been a modest gain for the week. The Dow Jones Industrial Average sank 1%, and a sharp fall for Amazon after its latest profit report dragged the Nasdaq composite to a market-leading loss of 1.4%. Treasury yields rose after a preliminary report suggested U.S. consumers’ expectations for inflation are jumping and the latest update on the U.S. job market came in mixed. President Donald Trump also said an announcement on tariffs is likely early next week.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — U.S. stocks are slumping Friday amid worries about higher inflation and tariffs, while a closely watched report gave a mixed picture of the U.S. job market.
The S&P 500 was down 0.9% and on track to wipe out what had been a modest gain for the week, with an hour remaining in trading, and the Dow Jones Industrial Average was down 440 points, or 1%. A sharp drop for Amazon following its latest profit report helped drag the Nasdaq composite to a market-leading loss of 1.4%.
Treasury yields also climbed in the bond market after a discouraging report on Friday morning suggested sentiment is unexpectedly souring among U.S. consumers. The preliminary report from the University of Michigan said U.S. consumers are expecting inflation in the year ahead to hit 4.3%, the highest such forecast since 2023.
That's a full percentage point above what they were expecting a month earlier, and it's the second straight increase of an unusual amount. Economists pointed to the possibility of U.S. tariffs on a wide range of imported products, which President Donald Trump has proposed and which could ultimately push up prices for U.S. consumers.
Trump said on Friday that he's likely to have an announcement on Monday or Tuesday on “reciprocal tariffs, where a country pays so much or charges us so much, and we do the same."
The consumer-sentiment data followed a mixed report on the U.S. job market. It showed hiring last month was less than half of December’s rate, but it also included encouraging nuggets for workers: The unemployment rate eased, and workers saw bigger gains in average wages than economists expected.
All the data taken together could keep the Federal Reserve on hold when it comes to interest rates. The Fed began cutting its main interest rate in September in order to relax the pressure on the economy and job market, but it warned at the end of the year that it may cut fewer times in 2025 than it earlier expected given worries about inflation staying stubbornly high.
Interest rates are one of the things Wall Street cares most about because lower rates can lead to higher prices for stocks and other investments. The downside is they can also give inflation more fuel.
For Scott Wren, senior global market strategist at Wells Fargo Investment Institute, the jobs report did nothing to change his forecast for the Fed to cut the federal funds rate just once in 2025. That’s a touch more conservative than many traders on Wall Street, who collectively see a roughly 45% chance that the Fed will cut at least twice, according to data from CME Group. Of course, some traders are also betting on the possibility for zero cuts.
Wren said financial markets could stay shaky in the near term, not only because of uncertainty about interest rates but also about Trump’s tariffs and other unknowns around the world.
After rocking financial markets at the start of this week, worries about a potentially punishing global trade war have eased a bit after Trump gave 30-day reprieves for tariffs on both Mexico and Canada. But “Europe might be next, and even if the final outcome is benign, uncertainty could weigh on global investment,” Bank of America economists wrote in a BofA Global Research report.
In the meantime, stocks of big U.S. companies continue to swing as they report how much profit they made during the last three months of 2024. Most are reporting better results than expected, as is typical, but that's not always enough.
Amazon, one of Wall Street’s most influential companies, topped analysts’ expectations for earnings at the end of 2024, but its stock nevertheless fell 4%. Investors focused instead on its forecast for upcoming revenue, which fell short of analysts’ expectations.
Homebuilders also tumbled to sharp losses as fewer cuts to interest rates by the Fed could help keep mortgage rates high. D.R. Horton fell 5.6%, and Lennar sank 3.8%.
On the winning side of Wall Street was Expedia Group, which leaped 16.7% after reporting better profit for the last three months of 2024 than analysts had forecast.
Expedia CEO Ariane Gorin said demand for travel during the latest quarter was stronger than expected, and the company is also bringing back its dividend for investors. It had suspended its payouts to shareholders in 2020 after the COVID-19 pandemic crushed the travel industry.
Take-Two Interactive Software climbed 15.5% after the video-game company likewise topped profit expectations for the latest quarter. CEO Strauss Zelnick said strength for its NBA 2K game was a major reason. The company also said it continues to expect its latest Grand Theft Auto game to release in the fall, easing concerns about a potential delay.
In the bond market, the 10-year Treasury yield rose to 4.48% from 4.44% late Thursday. The two-year Treasury yield, which more closely tracks expectations for the Fed, rose to 4.27% from 4.22%.
A fear among economists is that when U.S. households expect inflation to be high in the future, they could begin buying things in advance and making other moves that can set off a self-fulfilling cycle that worsens inflation.
In stock markets abroad, indexes fell modestly across Europe after finishing mixed in Asia.
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AP Business Writer Zen Soo contributed.
Stan Choe, The Associated Press
