The Dow Jones Industrial Average plunged more than 700 points — its worst day of the year — as dour economic reports closed out a holiday-shortened week fraught with new tariff threats and worries of softening consumer demand.
The blue-chip index, along with the S&P 500 and the Nasdaq, moved decisively lower on the heels of the data, and continued their slide into afternoon trading.
“I don’t like all this red on a Friday,” said Greg Bassuk, CEO at AXS Investments in New York. “We’re seeing consumer sentiment, tariffs and corporate earnings having leap-frogged AI and technology as the primary drivers of market direction.”
The Dow closed down 748.64, the S&P dropped 104.39 and the tech-heavy Nasdaq plummeted 438.36.
UnitedHealth emerged as one of the biggest drags on the market, plummeting 8% after reports surfaced that the Department of Justice is investigating the insurance giant.
The probe centers on allegations that the company manipulated patient diagnoses to secure higher payments from the Medicare Advantage program.
The sharp drop put the stock on track for its worst trading session since March 2020, when the pandemic triggered widespread market turmoil. The decline in UnitedHealth weighed heavily on the Dow, exacerbating losses across the board.
Adding to investor concerns, the University of Michigan’s consumer sentiment index registered a significant drop, falling to 64.7 in January.
This marked a 10% decline, far steeper than analysts had anticipated.
The survey also showed that consumers expect inflation to climb to 3.5% over the next five years, the highest level recorded since 1995.
The pessimistic outlook has fueled fears that inflationary pressures remain entrenched despite the Federal Reserve’s aggressive efforts to rein in rising prices by hiking interest rates.
On inflation, the one-year expectation leaped to 4.3%, the highest since November 2023.
At the five-year horizon, the outlook surged to 3.5%, the highest reading since April 1995.
Worries have increased on inflation amid looming fears over the effect of President Donald Trump’s tariffs.
Jamie Cox, managing partner at Harris Financial Group, noted that Wall Street is beginning to recognize the risks tariffs pose to consumer spending patterns.
“It’s pretty clear that markets are waking up to the consumer impact of tariffs. While the tariffs themselves may never get implemented, consumers are already adjusting their spending habits based on the possibility,” Cox said in an interview with CNBC.
The sell-off followed another downbeat session on Thursday, when the Dow plunged 450 points.
Walmart shares tumbled 6.5% on Thursday after the retail giant issued a weaker-than-expected earnings outlook, raising concerns about slowing consumer spending.
The decline continued into Friday, with Walmart shedding another 3%, bringing its total losses for the week to more than 9%.
Other companies, including Palantir, also saw declines, compounding market jitters.
For the week, the S&P 500 is down approximately 1%, while the Dow and Nasdaq have lost 2% and 1.6%, respectively.
The downturn reflects a shift in sentiment as investors digest a combination of inflationary pressures, corporate warnings, and broader economic uncertainty.
One emerging factor influencing market sentiment is the potential impact of tariffs on consumer behavior.
Despite the broader market pullback, some analysts see a silver lining.
Cox pointed out that the 10-year Treasury yield is seeing increased demand as investors shift toward more cautious positioning.
“The good news is that markets are taking some wind out of the recent inflationary momentum. The 10-year is catching a bid as investors seek safer assets,” he said.
With Post wires
