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Disappointing private sector and consumer sentiment surveys that sparked a selloff on Friday have carried into this week. Market watchers have differing opinions about the effects of tariffs and other parts of Trump’s agenda, which could prove inflationary but might also have the potential to slow growth.
Stocks continued to slide on Tuesday as markets digest new data about declining consumer sentiment and investors debate the potential impacts of President Donald Trump’s economic agenda. The recent selloff sets the stage for a blockbuster close to the week, starting with Nvidia’s highly anticipated earnings release after the bell on Wednesday.
The S&P 500 had dropped slightly as of Tuesday afternoon as the tech-heavy Nasdaq fell by more than 1%, extending declines of roughly 2.5% and 4.5% over the past five days, respectively. The ability of Jensen Huang’s chip behemoth Nvidia to exceed lofty expectations will likely determine the short-term fate of the AI trade, while important macroeconomic reports follow during the next two days.
Updated GDP growth numbers come in on Thursday, while Friday will feature closely watched data on consumer spending and the latest reading of the personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation metric.
The market pullback began Feb. 21 following the release of several disappointing reports. S&P Global’s purchasing managers’ index, or PMI, surveys indicated weakening private business activity, noted Bill Adams, chief economist at Comerica Bank.
“The services PMI fell into contractionary territory as federal spending cuts worried institutions reliant on public funding,” Adams wrote in a note Monday. “Manufacturing rose, but the report warned that some of the increase was likely due to manufacturers front-running tariffs.”
Meanwhile, Adams said concerns about tariffs and mass layoffs of federal employees driven by Elon Musk’s Department of Government Efficiency have also likely weighed on consumer confidence. The University of Michigan’s Index of Consumer Sentiment came in with its weakest reading since November 2023 on Feb. 21. Then, on Tuesday, think tank the Conference Board’s Consumer Confidence Index dropped to its lowest level since August 2021.
Stephanie Guichard, the Conference Board’s senior economist, said expectations of both future income and employment prospects weakened.
“Consumers who fear the impact of higher tariffs, spending cuts, and deportations are getting worried and are likely to be more cautious toward discretionary spending near-term,” Adams wrote in a note reacting to the survey’s results Tuesday.