US Markets Tumble as Inflation Data Surpasses Expectations
US stock markets experienced a sharp decline on Friday following the release of higher-than-expected inflation data, raising concerns about a potential resurgence in consumer prices this year. The core personal consumption expenditures (PCE) index, closely monitored by the Federal Reserve, rose 2.8% year-over-year in February, surpassing the anticipated 2.7% increase.
Major US indexes opened lower and continued to slide throughout the morning trading session. The Dow Jones Industrial Average plummeted over 600 points, while the tech-heavy Nasdaq Composite dropped more than 2%.
The core PCE index, which excludes volatile food and energy prices, increased by 0.4% month-over-month, exceeding the forecast of 0.3%. This data suggests a potential acceleration in price increases, further fueling investor concerns.
Adding to the economic uncertainty, consumer spending rose by 0.4%, falling short of the expected 0.5% increase. The combination of persistent inflation and reduced economic activity has raised fears of stagflation, a scenario that could limit the Federal Reserve’s ability to lower interest rates to stimulate the economy.
As of midday trading, the S&P 500 was down 1.79% at 5,591.57, the Dow Jones Industrial Average fell 1.46% to 41,683.51, and the Nasdaq Composite declined 2.51% to 17,356.28.
Market participants are also closely watching the potential impact of President Donald Trump’s trade policies on inflation. The PCE data released today reflects economic conditions before the implementation of Trump’s recent tariff measures, leaving investors uncertain about future price trends.
Business executives have expressed caution about new investments due to the administration’s unpredictable tariff policy. The Federal Reserve is expected to maintain its current stance amid inflationary pressures potentially arising from these tariffs.
Investors are now turning their attention to April 2, dubbed “Liberation Day” by President Trump, when new tariff developments are anticipated. Trump has hinted at potentially more lenient reciprocal tariffs, which had previously sparked a brief stock market rally.
As markets digest the latest economic data and brace for upcoming trade policy developments, volatility is expected to persist in the coming weeks.
