New York Stock Market Stumbles on Inflation and Reciprocal Tariffs [New York Stock Market Briefing]

The three major indices of the New York Stock Market fell by around 1%. This was due to a sharp rise in expected inflation among U.S. consumers and an announcement by President Donald Trump that he would impose reciprocal tariffs on several countries next week.

On the 7th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 44,303.40, down 444.23 points (0.99%) from the previous trading day. The Standard & Poor's (S&P) 500 Index fell 57.58 points (0.95%) to 6025.99, and the Nasdaq Composite plunged 268.59 points (1.36%) to 19,523.4.

U.S. consumers' one-year expected inflation rose unusually sharply. According to the University of Michigan, the preliminary consumer sentiment index for February was 67.8. This is a 4.6% decrease from the final figure of 71.1 in January and falls short of the market expectation of 71.1.

The market reacted particularly sensitively to the one-year expected inflation. February's one-year expected inflation surged by 1 percentage point to 4.3% from 3.3% in the previous month. This is the highest since November 2023 and marks a significant rise for two consecutive months.

Joanne Hsu, director at the University of Michigan, analyzed, "There have been only five instances in the past 14 years where one-year expected inflation rose by more than 1 percentage point in a month," adding, "The current figure significantly exceeds the pre-pandemic level of 2.3~3%."

Trump's announcement of reciprocal tariffs further pressured the indices.

Trump, speaking to reporters at the White House, said, "I plan to announce after a meeting on reciprocal trade next Monday or Tuesday." Although he mentioned reciprocal trade, it was interpreted in context as meaning reciprocal tariffs. This means imposing taxes on imports into the U.S. equivalent to the tariff rates that exporting countries impose on U.S. products.

This news led to a sell-off, particularly among major tech companies.

Apple fell 2.40%, Microsoft dropped 1.46%, and Tesla and Alphabet also recorded declines in the 3% range. Amazon, despite reporting favorable earnings after the market closed the previous day, fell 4.05% as its first-quarter earnings outlook disappointed.

The move to impose reciprocal tariffs also dampened sentiment for traditional industrial and blue-chip stocks. Among the 30 stocks that make up the Dow Jones, only Nvidia, Visa, Coca-Cola, and Chevron showed slight gains, while all other stocks fell.

By sector, all sectors declined. Consumer discretionary plunged 2.52%, marking the largest drop. Materials, technology, and communication services also recorded declines in the 1% range.

According to the Chicago Mercantile Exchange (CME) FedWatch Tool, the probability of a 25 basis point cut in the March base rate was reflected at 8.5% by the close. This is a significant decrease from 16.0% at the close the previous day.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) rose 1.04 points (6.71%) to 16.54 from the previous session.

Sung-ryeol Lee, Hankyung.com reporter yisr0203@hankyung.com