Wall Street ends sharply lower on mounting concerns over economy, tariffs

By Stephen Culp

NEW YORK (Reuters) -U.S. stocks tumbled on Friday, extending their selloff in the wake of dour economic reports and closing the book on a holiday-shortened week fraught with new tariff threats and worries of softening consumer demand.

All three major U.S. stock indexes moved decisively lower on the heels of the data, and continued their slide into afternoon trading.

The S&P 500 suffered its largest single-day percentage drop since December 18, as did the small cap Russell 2000.

For the week, all three indexes lost ground, with the Dow registering its steepest Friday-to-Friday plunge since mid-October.

"I don't like all this red on a Friday," said Greg Bassuk, CEO at AXS Investments in New York. "We're seeing consumer sentiment, tariffs and corporate earnings having leap-frogged AI and technology as the primary drivers of market direction."

Economic data showed U.S. business activity decelerating and consumer sentiment deteriorating, with survey participants expressing an increasingly gloomy outlook in the face of economic unknowns.

The data comes on the heels of Walmart's disappointing guidance on Thursday, which sparked fears of dampening consumer demand.

U.S. businesses' optimism has "evaporated," according to PMI commentary provided by S&P Global's chief economist Chris Williamson, amid "a darkening picture of heightened uncertainty."

"Uncertainty is the new investor narrative," Bassuk added. "It's sparking the volatility that we've seen this week."

"We're anticipating that the uncertainty and the volatility is going to remain at least through the end of this first quarter."

Economically sensitive sectors, such as Dow Transports, chips, smallcaps, housing, and consumer discretionary slid more than 2%.

Megacap momentum stocks dropped 2.9%, and every stock in the "Magnificent Seven" ended in negative territory, with Nvidia, due to report earnings next week, tumbling 4.1%.

The CBOE volatility index closed at its highest level since February 3.

This week, U.S. President Donald Trump said he will soon announce new tariffs covering lumber and forest products, in addition to previously announced plans to impose duties on imported cars, semiconductors and pharmaceuticals.

The Dow Jones Industrial Average fell 748.63 points, or 1.69%, to 43,428.02, the S&P 500 lost 104.39 points, or 1.71%, to 6,013.13 and the Nasdaq Composite lost 438.36 points, or 2.20%, to 19,524.01.

Among the 11 major sectors of the S&P 500, all but consumer staples ended lower, with consumer discretionary and tech suffering the steepest percentage losses.

Fourth-quarter earnings season is in its final stretch. Some 425 of the companies in the S&P 500 have reported, with 76% of them beating Wall Street expectations, according to LSEG.

Tesla and Rivian each dropped 4.7% after both electric vehicle makers announced recalls.

Analysts now see aggregate fourth-quarter S&P 500 earnings growth of 15.7% year-on-year, a significant improvement over the 7.8% annual growth prediction as on January 1, per LSEG.

Shares of UnitedHealth tumbled 7.2% following a Wall Street Journal report that the Department of Justice has launched an investigation into the health insurer's Medicare billing practices.

Block tumbled 17.7% after the payment firm's fourth-quarter profit fell short of estimates.

Akamai Technologies dropped 21.7% as the cybersecurity company forecast annual 2025 revenue below estimates.

Declining issues outnumbered advancers by a 2.64-to-1 ratio on the NYSE. There were 102 new highs and 119 new lows on the NYSE.

On the Nasdaq, 1,087 stocks rose and 3,301 fell as declining issues outnumbered advancers by a 3.04-to-1 ratio.

The S&P 500 posted 19 new 52-week highs and 8 new lows while the Nasdaq Composite recorded 67 new highs and 135 new lows.

Volume on U.S. exchanges was 17.06 billion shares, compared with the 15.30 billion average for the full session over the last 20 trading days.

(Reporting by Stephen Culp; Additional Reporting by Shashwat Chauhan and Sukriti Gupta in Bengaluru; Editing by David Gregorio)