U.S. stock markets tumbled today, February 7, 2025, as rising inflation expectations and looming trade policy changes rattled investor confidence. The S&P 500 shed 0.9%, while the Dow Jones Industrial Average fell 400 points, representing a 1% decline. The tech-heavy Nasdaq Composite led the downturn with a 1.4% drop, marking its second consecutive weekly loss.
The market’s decline came as consumer inflation expectations reached levels not seen since 2023. According to the University of Michigan’s latest survey, Americans now expect inflation to run at 4.3% over the next year, significantly higher than previous estimates. Adding to these concerns, potential new trade policies emerged as a market headwind, with President Trump indicating plans to implement reciprocal tariffs to match other nations’ trade practices.
The January jobs report painted a complex picture of the labor market. While job creation slowed dramatically to 83,000 positions—less than half of December’s pace—the unemployment rate improved to 4.0%. Wage growth proved particularly strong, with monthly gains of 0.6% and annual growth of 4.5%. This combination of data points has led many traders to scale back their expectations for Federal Reserve rate cuts in 2025, with some now anticipating just one reduction for the year.
Corporate earnings brought their own set of challenges to the market. Despite reporting strong fourth-quarter profits, Amazon’s shares dropped 4% as investors focused on disappointing revenue forecasts. However, some companies bucked the negative trend. Travel giant Expedia saw its stock surge 16.7% after exceeding profit expectations and announcing the return of its dividend program. Gaming company Take-Two Interactive also impressed investors, jumping 15.5% on strong NBA 2K sales and positive updates about its Grand Theft Auto timeline.
Sector-specific pressures were evident across the market. Homebuilders like D.R. Horton faced significant pressure, dropping 3-5% as fears of sustained high mortgage rates weighed on the industry. The semiconductor sector struggled following earnings reports, while energy stocks declined as oil prices fell 2% for the week amid U.S.-China trade concerns.
Several individual stocks made notable moves. Tesla continued its downward trend, falling 9% for the week as Chinese sales showed signs of weakness. In contrast, Uber shares gained 8% after news broke of Bill Ackman’s $2 billion investment in the company. Beauty retailer E.l.f. Beauty saw one of the day’s steepest declines, plunging 20% after reducing its outlook for 2025.
As markets closed for the week, investors remained focused on upcoming Federal Reserve communications and potential trade policy announcements, with both factors likely to influence market direction in the coming weeks. The combination of persistent inflation signals and geopolitical trade risks has created a challenging environment for investors navigating the early months of 2025.
