US benchmark equity indexes faced a downward trajectory as traders reacted to the latest economic data revealing concerning trends. A significant survey indicated a notable decline in consumer sentiment alongside a sharp increase in inflation expectations, prompting market jitters. Specifically, the Nasdaq Composite witnessed a drop of 2.1%, closing at 19,543.5.
The S&P 500 and the Dow Jones Industrial Average followed suit, both declining by 1.6% to end their sessions at 6,019.7 and 43,464.5, respectively. Among various market sectors, consumer discretionary and technology exhibited the most substantial downturns, contrasting with consumer staples which emerged as the leading gainers. The reported consumer sentiment plunged by 9.8% sequentially, landing at 64.7 in February.
This worrisome trend aligns with heightened year-ahead inflation expectations, as per the survey data compiled by the University of Michigan. Joanne Hsu, Director of the Surveys of Consumers, remarked that the findings encapsulate “fears that tariff-induced price increases are imminent.” In another unexpected turn, the output growth within the US private sector decelerated in February, attributed largely to a contraction in the services sector.
The overall optimism appeared to diminish, with traders expressing concerns over the potential ramifications of tariff-related issues and anticipated domestic spending cuts, reflected in S&P Global's (SPGI) flash purchasing managers' index. Additionally, the National Association of Realtors reported that existing home sales in the US plunged beyond expectations for January, significantly impacted by elevated mortgage rates and soaring house prices. In terms of bond yields, the 10-year US Treasury yield decreased by 8.1 basis points, settling at 4.42%, while the two-year rate dipped by 7.4 basis points to reach 4.19%.
Oil prices also mirrored the downward trend, with West Texas Intermediate crude oil falling by 3%, trading at $70.29 a barrel. The observations surrounding the $US30 and $US500 continue to evoke discussions as investors navigate through these turbulent economic waters. Market analysts are watching these developments closely, as consumer behavior and inflation expectations can significantly influence future economic strategies..