US equity markets experienced a significant downturn this week as a combination of lackluster economic data and dismal guidance from Walmart (NYSE: WMT) raised concerns among consumers. The Federal Reserve has also indicated that ongoing trade and political risks suggest a pause in the anticipated cuts to interest rates. The S&P 500 index saw a decline, closing at 6,013.13 on Friday, down from 6,114.63 the previous week.
Similarly, the Nasdaq Composite fell from 20,026.77 to 19,524.01, while the Dow Jones Industrial Average dropped from 44,545.46 to 43,428.02. Walmart, one of the largest retailers in the United States, experienced a notable share price drop of 8.9% this week. This was largely attributed to their Q1 earnings and fiscal 2026 adjusted guidance, which fell short of analysts' expectations, adding to investor uncertainty. In related news, the University of Michigan's consumer sentiment index underwent an unexpected downward revision for February.
Survey respondents are now projecting an inflation rate of 4.3% over the next year, rising from the previous expectation of 3.3%. Additionally, the predicted annual inflation rate over the next five years has also increased from 3.2% to 3.5%. Further complicating the economic landscape, recent data revealed an unanticipated slowdown in the growth of the US private sector output for February.
This decline was primarily driven by a contraction in the services sector, reflecting dwindling optimism amidst fears surrounding potential tariffs and possible cuts to domestic spending. S&P Global's flash purchasing managers' index indicated these concerning trends. The minutes from the Federal Reserve's policy meeting revealed a consensus among participants to remain 'well positioned' to pause interest rate cuts, given the current uncertainty around the fiscal policy outlook and the persisting high inflation rates.
The Federal Open Market Committee (FOMC) is awaiting more definitive progress on inflation metrics while navigating the complexities surrounding fiscal policy decisions. Atlanta Federal Reserve Bank President Raphael Bostic highlighted that potential tariffs and the ever-evolving immigration policies are sources of considerable uncertainty that could influence inflation and employment figures.
"In a nutshell, contacts are concerned that tariffs could increase costs," Bostic stated. He added, "Many feel confident that if that happens, then they can pass along higher costs in their prices," potentially leading to a further rise in consumer prices. The following stock tickers were frequently mentioned in conjunction with this analysis: $WMT, $US30, and $US500..