U.S. Stocks See Further Downside After Early Pullback

Stocks came under pressure over the course of the first hour of trading on Friday and have seen further downside as the day has progressed. The major averages have all slid firmly into negative territory, with the Nasdaq and the S&P 500 giving back ground after closing higher for three straight days.

Currently, the major averages are lingering near their worst levels of the day. The Nasdaq is down 218.76 points or 1.1 percent at 19,573.23, the S&P 500 is down 40.84 points or 0.7 percent at 6,042.74 and the Dow is down 317.22 points or 0.7 percent at 44,430.41.

The weakness that emerged early in the session came after the University of Michigan released a report showing consumer sentiment has unexpectedly deteriorated in February amid a surge by year-ahead inflation expectations.

The University of Michigan said its consumer sentiment index slumped to 67.8 in February after rising to 71.1 in January. Economists had expected the index to inch up to 72.0.

With the unexpected decrease, the consumer sentiment index dropped to its lowest level since hitting 66.4 in July 2024.

The deterioration by consumer sentiment came as year-ahead inflation expectations spiked to 4.3 percent in February from 3.3 percent in January, reaching the highest level since November 2023.

“Many consumers appear worried that high inflation will return within the next year,” said Surveys of Consumers Director Joanne Hsu. “This is only the fifth time in 14 years we have seen such a large one-month rise (one percentage point or more) in year-ahead inflation expectations.”

Stocks saw further downside after President Donald Trump said he plans to announce reciprocal tariffs on many countries next week, with the U.S. imposing tariffs on imports equal to the rates imposed on American exports.

Traders are also digesting mixed U.S. jobs data, with a closely watched Labor Department showing weaker than expected job growth in January but an unexpected decrease by the unemployment rate.

The report said non-farm payroll employment rose by 143,000 jobs in January compared to economist estimates for an increase of about 170,000 jobs.

Meanwhile, employment in December and November surged by upwardly revised 307,000 jobs and 261,000 jobs, respectively, reflecting a net upward revision of 100,000 jobs.

The Labor Department also said the unemployment rate dipped to 4.0 percent in January from 4.1 percent in December. The unemployment rate was expected to remain unchanged.

“An unemployment rate at 4% is considered very low, giving the Fed reason to keep fed funds unchanged in the near term,” said Jeffrey Roach, Chief Economist for LPL Financial.

Sector News

Housing stocks continued to see substantial weakness amid a surge by treasury yields, dragging the Philadelphia Housing Sector Index down by 2.6 percent.

Significant weakness also remains visible among retail stocks, as reflected by the 2.1 percent slump by the Dow Jones U.S. Retail Index.

A steep drop by Amazon (AMZN) is weighing on the sector, with the online retail giant tumbling by 3.7 percent after reporting better than expected fourth quarter results but providing disappointing sales guidance for the current quarter.

Biotechnology and semiconductor stocks have also come under pressure over the course of the session, while airline and networking stocks continue to see some strength on the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan’s Nikkei 225 Index slid by 0.7 percent, while China’s Shanghai Composite Index jumped by 1.0 percent.

Meanwhile, the major European markets all moved lower on the day. The German DAX Index fell by 0.5 percent, the French CAC 40 Index declined by 0.4 percent and the U.K.’s FTSE 100 Index dipped by 0.3 percent.

In the bond market, treasuries have shown a notable move to the downside. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 5.9 basis points at 4.497 percent.