US stocks experienced a modest decline on Friday as investors reacted to new inflation data and the ongoing uncertainty surrounding President Donald Trump’s trade policies.
The Dow Jones Industrial Average dropped by 115 points, or 0.3%, while the S&P 500 slipped by 0.4%, and the Nasdaq Composite fell 0.7%. These moves came as traders absorbed the latest inflation figures, which showed higher-than-expected numbers that stoked concerns about persistent price pressures.
The core personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation measure, rose 2.8% in February from a year earlier, exceeding the 2.7% increase economists had expected. On a monthly basis, the core PCE increased by 0.4%, further intensifying concerns over stubborn inflation. This figure signals a potential challenge for the Fed, which aims for inflation to return to its 2% target.
Additionally, consumer spending rose by 0.4% in February, though this was below the 0.5% increase economists had forecasted, suggesting that consumers may be tightening their purse strings amid inflationary pressures.
“The latest PCE report presents mixed signals,” said Dan Siluk, portfolio manager at Janus Henderson. “While headline figures met expectations, core inflation is showing unexpected resilience, which may force the market to recalibrate expectations for monetary policy, especially regarding the timing of interest rate changes.”
These inflation concerns were compounded by tariff developments. On Thursday, President Trump announced a 25% tariff on all imported cars not made in the US, which sent waves of uncertainty through the markets. This move comes just ahead of the anticipated implementation of reciprocal tariffs on April 2, adding to fears of an intensifying trade war. Investors are awaiting more clarity on the situation, with many hoping for a resolution in the coming days.
In the wake of these economic and policy developments, Wall Street was on track for a mixed weekly performance. The Nasdaq is down 0.4% for the week, while both the S&P 500 and the Dow are poised for slight weekly gains. On Thursday, all three major indices closed lower, as investors weighed the implications of the tariff announcement.
The inflation report and tariff developments have placed increased focus on the Federal Reserve’s next moves. With inflation still above the Fed’s target, concerns persist about the potential need for further interest rate adjustments to control price pressures. However, with consumer sentiment showing signs of weakness and the economy grappling with trade uncertainties, the central bank faces a challenging path ahead.
