US stocks experienced a decline on Tuesday, driven by a sharp drop in consumer confidence, which further fueled concerns that President Donald Trump’s tariffs may undermine the nation’s economic growth.
The S&P 500 index, a key benchmark of US stocks, fell 0.5%, while the tech-heavy Nasdaq Composite dropped 1.4%. However, the sell-off moderated after steeper losses earlier in the day.
Following Trump’s election in November, Wall Street saw a rally on optimism regarding pro-business policies, with the S&P 500 reaching record highs just last Wednesday. However, a series of disappointing economic reports, from weak consumer sentiment to sluggish home sales, has pushed the index into a four-day decline.
The Conference Board’s February consumer confidence index dropped by 7 points to 98.3, marking the largest decline since August 2021 and falling well short of the expected 102.5. Notably, consumer outlook on the economy has now fallen below the level that typically signals a looming recession.
In addition, the report revealed a jump in inflation expectations, with the 12-month outlook rising to 6% from 5.2%. Stephanie Guichard, a senior economist at the Conference Board, noted that the increase was driven by persistent inflation and rising prices for everyday goods, such as eggs. She also highlighted the surge in mentions of trade and tariffs, particularly regarding the current administration’s policies.
Echoing Guichard’s sentiments, JPMorgan economist Abiel Reinhart stated that political developments are contributing to the shift in consumer sentiment.
Investors are becoming more “uncomfortable” with the combination of negative economic data and the uncertain impact of Trump’s tariff policies, said Charlie McElligott, a derivatives strategist at Nomura. He noted that clients at Nomura have increased their purchases of options, betting on significant declines in the S&P 500.
In response to the market’s downturn, investors shifted to defensive stocks, which tend to outperform during economic slowdowns. Shares of companies like Dr Pepper and Colgate-Palmolive rose more than 2% on Tuesday, while real estate stocks, which benefit from lower interest rates, also saw gains.
Meanwhile, US government debt—considered a safe haven during times of market instability—rose in price, causing yields to fall. The 10-year Treasury yield dropped 0.1 percentage points to 4.29%, marking its lowest point since mid-December.
Tech stocks, which had performed well in recent years due to strong economic growth, were among the hardest hit. Palantir, a data analytics company co-founded by Peter Thiel, fell 3.2%, while digital ad company AppLovin dropped 5.9%. Tesla saw an 8.4% decline, pushing its market value below $1 trillion.
According to Andrew Lapthorne of Société Générale, investors are increasingly moving away from high-growth tech stocks in favor of “low volatility” options within sectors like healthcare, utilities, and consumer staples.
Concerns over economic performance and Trump’s tariff policies also contributed to a drop in oil prices. Brent crude, the global oil benchmark, fell 2.1% to $73.20 a barrel, while West Texas Intermediate dropped 2.2% to $69.13.
Mizuho Securities analyst Robert Yawger linked the weak consumer confidence data to a reduction in demand for crude oil and gasoline, further fueling the commodity’s decline.
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