US stocks tumbled on Friday as renewed fears over inflation and escalating trade tensions weighed on investor sentiment. The Dow plunged over 400 points, while the S&P 500 and Nasdaq also posted sharp declines, closing the week in negative territory. The market turned lower after President Trump announced plans for reciprocal tariffs on trading partners, adding further uncertainty to the economic outlook. Meanwhile, consumer sentiment data revealed a sharp drop, with inflation expectations rising to their highest level since November 2023. Despite a stronger-than-expected jobs report, concerns over wage growth and its potential impact on Federal Reserve policy added to the market’s volatility. 

Key Takeaways:

  • Dow Closes 400 Points Lower Amid Inflation and Tariff Worries: The Dow Jones Industrial Average fell 444.23 points, or 0.99%, to close at 44,303.40, as investor sentiment deteriorated following President Trump’s announcement of reciprocal tariffs on US trading partners. 
  • S&P 500 and Nasdaq Extend Losses to End the Week Lower: The S&P 500 declined 0.95% to 6,025.99, as losses in technology and consumer discretionary stocks weighed on the broader market. The Nasdaq Composite fell 1.36%, closing at 19,523.40, as weakness in major technology companies continued. 
  • US Jobs Report Shows Slower Hiring, Consumer Sentiment Declines: The US economy added 143,000 jobs in January, marking a significant slowdown from December’s revised 307,000 and falling short of the 169,000 forecasted by Dow Jones. Despite the weaker payroll number, the unemployment rate declined to 4.0% from 4.1%, as labour force participation increased to 62.6%. Wage growth remained stronger than expected, fuelling concerns that inflationary pressures may persist. The new payroll figures, lowering total job counts by 589,000 over the past 12 months. Meanwhile, US consumer sentiment dropped sharply to 67.8 in February from 71.1 in January. Inflation expectations surged, with respondents forecasting a 4.3% rise in consumer prices over the next year, the highest reading since November 2023.
  • European Stocks End the Week Mixed Amid Trade and Growth Concerns: The pan-European Stoxx 600 index rose 0.54% for the week, despite volatility caused by US-China trade tensions and economic data releases. The FTSE 100 Index added 26.57 points, or 0.31%, to close at 8,700.53, while France’s CAC 40 Index fell 47 points, or 0.59%. Germany’s DAX Index dropped 134 points, or 0.61%, as weak industrial output weighed on sentiment. Meanwhile, German exports increased in December, though imports declined by 2.8%, contributing to a foreign trade surplus of 241.2 billion euros in 2024. The Bank of England cut its key interest rate by 25 basis points but simultaneously halved its 2025 GDP growth forecast from 1.5% to 0.75%, reflecting concerns about a slowing economy.
  • Asia-Pacific Markets See Mixed Performance Amid Policy and Economic Data: Asia-Pacific markets ended the week with mixed results as investors reacted to India’s rate cut and Japan’s economic data. The Nikkei 225 fell 0.72% to 38,787.02, while the Topix declined 0.54% to 2,737.23, despite Japanese household spending rising 2.7% year-on-year, far exceeding the expected 0.2% increase. Australia’s S&P/ASX 200 dipped 0.11% to 8,511.4, while South Korea’s Kospi lost 0.58% to close at 2,521.92. In contrast, China’s CSI 300 gained 1.3% to 3,892.70, and Hong Kong’s Hang Seng Index rose 1.1%, lifted by optimism over potential economic stimulus from Beijing.
  • Treasury Yields Rise as Inflation Concerns Mount: US Treasury yields climbed Friday after a surge in consumer inflation expectations and stronger-than-expected wage growth. The 10-year Treasury yield increased by five basis points to 4.489%, while the 2-year Treasury yield rose eight basis points to 4.289%. 
  • Oil Prices Post Third Consecutive Weekly: Oil markets remained under pressure, with Brent crude rising 0.51% to $74.67 per barrel on Friday but still closing the week down nearly 3%. Similarly, West Texas Intermediate (WTI) crude gained 0.61% to $71.04 per barrel, yet remained on track for a 2% weekly loss. Despite new US sanctions targeting Iranian crude exports, oil prices continued to struggle amid concerns over a potential economic slowdown.

FX Today:

  • EUR/USD Extends Losses: The EUR/USD pair fell 0.50% on Friday, closing at 1.0331 as the US dollar strengthened amid rising inflation concerns and hawkish Federal Reserve expectations. The pair briefly tested 1.0410 before reversing lower, confirming resistance at the 50-day moving average at 1.0410. Unless EUR/USD can reclaim this level, further downside remains likely. Support is currently seen at 1.0300, and a break below this level could push the pair toward 1.0250. On the upside, a recovery above 1.0350 would be needed to ease bearish pressure. 
  • GBP/USD Fails to Hold Gains: GBP/USD slipped 0.19% to 1.2411, as the pair struggled to maintain bullish momentum. After reaching an intraday high of 1.2490, price reversed lower, reinforcing resistance at the 50-day moving average at 1.2497. On the downside, immediate support is seen at 1.2380, and a break below this level could push GBP/USD toward 1.2300, last tested in late January. If buyers manage to reclaim 1.2500, a move toward 1.2600 is possible. However, the failure to hold gains suggests that bearish pressure remains, and another leg lower could develop if 1.2380 does not hold.
  • USD/JPY Stabilises After Recent Decline: USD/JPY traded at 151.30, down 0.04% from the previous session, stabilising after a sharp selloff in recent days. The pair tested a low of 150.92 before bouncing slightly, showing some signs of support. However, with price now trading below the 100-day moving average at 152.59, bearish pressure remains evident. The next major support lies at 150.50, and a break below this could trigger further losses toward 149.50. If USD/JPY manages to recover, resistance is seen at 152.00, where the 200-day moving average at 152.71 aligns. A break above this level would be needed to shift momentum back in favour of buyers, with 153.50 as the next upside target. However, unless price reclaims 152.00, the short-term trend remains bearish, with further downside risks likely.
  • USD/CHF Pushes Higher, Testing Resistance: The USD/CHF pair advanced 0.51% to 0.9093, continuing its recovery from last week’s pullback. After testing support near the 50-day moving average at 0.9000, buyers stepped in, driving price higher toward the 0.9100 resistance level. A break above this could push USD/CHF toward 0.9150, a level last seen in late January. If the pair fails to hold above 0.9050, another retest of 0.9000 is likely, followed by the 100-day moving average at 0.8831. A break below these levels would indicate a deeper correction toward 0.8800. However, with buyers maintaining control above 0.9050, the trend remains bullish, and another push toward 0.9150 is possible in the coming sessions.
  • Gold Rises as Inflation Concerns Persist and Trade War Fears: Gold resumed its uptrend on Friday amid escalating trade tensions and a mixed US jobs report. Gold traded at 2,863, up 0.26% from the previous session, continuing its steady climb. The metal reached a high of 2,886 before retreating slightly, showing signs of resistance near this level. Gold remains well above its 50-day moving average at 2,691, reinforcing the strength of the ongoing uptrend. The next key resistance is at 2,880 which could trigger further bullish momentum if breached. A pullback toward 2,850 would not be surprising, with stronger support near 2,830. If sellers push prices below this level, the 100-day moving average at 2,679 could act as the next key support. 

Market Movers:

  • Expedia Surges on Strong Earnings Beat: Shares of Expedia jumped 17.6% after the online travel company reported fourth-quarter earnings that exceeded Wall Street expectations. The company posted adjusted earnings of $2.39 per share on revenue of $3.18 billion.
  • Amazon Drops After Disappointing Guidance: Amazon shares fell 4.2% after the company issued weaker-than-expected guidance for the first quarter. The e-commerce giant projected sales between $151 billion and $155.5 billion, falling short of the estimate of $158.5 billion. 
  • Affirm Surges on Earnings Beat: Buy-now-pay-later provider Affirm saw its shares jump 21.8% after beating both revenue and earnings estimates for its fiscal second quarter. The company reported $866 million in revenue, surpassing estimates of $807 million. 
  • Pinterest Soars on Strong Fourth-Quarter Results: Pinterest stock climbed 19.1% after reporting fourth-quarter revenue growth of 18% year-over-year. The company also announced a net income of $1.85 billion and global monthly active users increased 11% to 553 million. 
  • Cloudflare Jumps on Strong Earnings and Revenue Beat: Cloudflare shares rose 17.8% after the cloud cybersecurity company exceeded fourth-quarter earnings expectations. The company reported adjusted earnings of 19 cents per share on revenue of $460 million, beating estimates of 18 cents per share on $452 million in revenue. 

As the week came to a close, markets remained under pressure amid renewed fears of inflation, trade tensions, and shifting monetary policies. The Dow fell over 400 points, erasing midweek gains, while the S&P 500 and Nasdaq also ended lower, dragged down by weakness in major technology stocks like Amazon and Alphabet. Investors reacted to President Trump’s tariff announcement, which added uncertainty to an already fragile market environment. US consumer sentiment dropped sharply, with inflation expectations surging to 4.3%, fuelling concerns that the Federal Reserve may maintain higher interest rates for longer. The latest jobs report showed slowing employment growth, though the unemployment rate fell to 4.0%. With inflationary pressures mounting and global trade uncertainties persisting, all eyes are now on the Federal Reserve’s next move and its potential impact on market direction.