US stock market crashes in its worst day since 2024

The US stock market collapsed on Friday, posting its worst single-day loss since December 2024, as traders dumped risk assets on fears of a weakening economy and stubborn inflation, as new economic data showed shaky consumer confidence, declining home sales, and slowing business activity—all while the White House ramped up its tariff war.

By the time the market closed, the Dow Jones Industrial Average had plunged 748.63 points (1.69%) to 43,428.02. The S&P 500 lost 1.71%, finishing at 6,013.13, while the Nasdaq Composite dropped 2.2% to 19,524.01.

Traders offloaded stocks as fears mounted about the weekend—another 48 hours where Trump could drop more tariff bombs after already threatening (repeatedly) to slap a 25% duty on cars, semiconductors, and pharmaceuticals.

Meanwhile, a closely watched measure of consumer confidence issued by the University of Michigan fell sharply in February from January. The survey also showed long-term inflation expectations reached the highest level since 1995.

The housing market is breaking down. Sales of existing homes fell 4.9% in January, a far sharper decline than expected. Buyers are pulling back, squeezed by sky-high mortgage rates and rising home prices.

That wasn’t the only red flag. The US services sector just shrank at its fastest rate in over two years, according to the latest S&P Global data. Business activity is slowing, and tariffs are making it worse.

“The upbeat mood seen at the start of the year has evaporated,” said Chris Williamson, chief business economist at S&P Global. “Uncertainty is rising, business activity is stalling, and inflation remains a serious issue.”

Wall Street’s biggest names take a hit

Big tech got crushed as investors bailed on high-growth names like Nvidia, Meta, Alphabet, Microsoft, Palantir, and other investor favorites. According to data rom Google Finance, the risk-off sentiment sent cash pouring into defensive stocks, with Procter & Gamble rising 1.8% and General Mills and Kraft Heinz gaining over 3%.

Walmart felt the pain too. The stock dropped 2.5%, its second straight day of declines, after the company warned that the consumer outlook is weakening.

For the week, the S&P 500 slid 1.7%, while the Dow and Nasdaq both lost 2.5%.

The sell-off was accompanied by a rally in Treasury notes, as investors sought the relative safety of government debt, and come at the end of a week of continued geopolitical uncertainty.

The Federal Reserve is now in focus. Market bets on interest rate cuts changed fast, with traders now seeing a 55% chance that the Fed will cut rates two to three times by the end of 2025, bringing them down to 3.50%-3.75% from the current 4.25%-4.50%. On Thursday, those odds were just 44.4%.

By October, futures suggest a 50-50 chance of a deeper cut between half and three-quarters of a percentage point—a massive change in expectations from just a day before, when the probability was only 38%.

Options expiry adds to market chaos

Friday was also a major options expiration day, which meant huge volumes and wild price swings. Nearly 80% of stocks in the S&P 500 finished lower, while small-cap stocks took an even bigger beating, with the Russell 2000 sinking more than 2%.

“It’s pretty clear that markets are waking up to the consumer impact of tariffs,” said Jamie Cox, managing partner at Harris Financial Group. “Even if these tariffs never take effect, consumers are already changing their behavior.”

Wall Street is starting to price in the full effects of Trump’s trade war. Investors had initially brushed off the White House’s tariff threats, assuming they were just negotiating tactics. But now, it’s looking real. The administration has already promised tariffs on Canada and Mexico, two of America’s largest trading partners. Manufacturers are feeling the heat as well—rising input costs and wage pressures are making it more expensive to operate.

“That buy-the-dip mentality, it’s never been higher at the retail level … it’s just the widespread exuberance in the market,” Adam Turnquist, chief technical strategist at LPL Financial, told CNBC. “It’s kind of a Pavlovian response. They’ve bought the dip for two, three years plus and it’s paid off, so they feel very confident about their stock-picking ability and trading this bull market,” Turnquist added.

Cryptopolitan Academy: How to Write a Web3 Resume That Lands Interviews - FREE Cheat Sheet