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US stocks fell the most in two months as a bout of gloomy economic data showed sentiment among consumers and businesses has cooled a month into Donald Trump’s presidency.
The S&P 500 fell 1.7 per cent on Friday, the worst slide for Wall Street’s blue-chip index since December 18, when the Federal Reserve cut interest rates but signalled a slower pace of monetary policy easing in 2025.
The tech-focused Nasdaq Composite was down 2.2 per cent in its steepest fall since January 27, when Big Tech stocks were hit as worries over advancements by Chinese artificial intelligence start-up DeepSeek rattled the sector.
The sharp decline came as a series of reports signalled that the world’s biggest economy was facing growing challenges from elevated borrowing costs and inflation. Trump’s tariffs have also begun to dent sentiment among consumers and businesses.
Wall Street’s wobble interrupts a rally in US equities, which sent the S&P 500 to a record high on Wednesday.
Trump’s policies of cutting regulations and seeking to boost growth had given stocks a boost following his election in November. But some of that enthusiasm has recently eased as concerns have swirled over the effects of tariffs, which are widely expected to increase inflation.
Data released on Friday showed sales of previously-owned homes dropped 4.9 per cent in January from the previous month as buyers struggled with persistently high mortgage rates and elevated prices across large swaths of the country.
Meanwhile, a closely watched measure of consumer confidence issued by the University of Michigan fell sharply in February from January. The survey also showed long-term inflation expectations reached the highest level since 1995.
“The short answer is that the consumer has got problems,” Interactive Brokers chief economist Steve Sosnick said, pointing to weaker data recently, including soft retail sales figures last week.
Separately, a closely watched survey from S&P Global indicated that activity in the vast US services sector contracted for the first time in more than two years this month. Manufacturers noted that input costs had risen sharply as a result of tariff-induced price rises and wage pressures.
“The upbeat mood seen among US businesses at the start of the year has evaporated, replaced with a darkening picture of heightened uncertainty, stalling business activity and rising prices,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Reflecting the breadth of Friday’s sell-off, about three in four S&P 500 stocks declined and the small cap-focused Russell 2000, comprising of more domestically-concentrated groups, closed 2.9 per cent lower.
Only consumer staples — a classic defensive play — gained on Friday out of the S&P’s 11 sectors. Consumer discretionary, which performs well when growth is good, was the worst performer, slipping 2.8 per cent.
Friday also marked the expiration date for a large number of stock options. Such sessions often tend to be characterised by volatile share price moves.
The sell-off was accompanied by a rally in Treasury notes, as investors sought the relative safety of government debt, and comes at the end of a week of continued geopolitical uncertainty.
The yield on the benchmark 10-year US Treasury was down 0.08 percentage points at a two-week low of 4.43 per cent.
Trump earlier this week said he would introduce 25 per cent tariffs on car imports — as soon as April 2 — and also flagged the prospect of placing levies on imported semiconductors and pharmaceuticals. The US has previously said it will impose huge tariffs against Mexico and Canada, its biggest trading partners.
The administration has also been cutting thousands of workers from the federal workforce, and Trump has tested political nerves by opening peace talks with Russia on ending the war in Ukraine and calling President Volodymyr Zelenskyy a “dictator”.
Government bonds also rose in Europe, pushing yields lower.
The yield on the 10-year Bund was down 0.08 percentage point at 2.45 per cent ahead of Germany’s federal election on Sunday, which polls indicate will be won by the centre-right Christian Democratic Union.
Unlike their US peers, the broad gauge of Europe’s biggest stocks closed higher on Friday, although Germany’s Dax closed slightly lower.
Additional reporting by Jennifer Hughes in New York
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