The Dow Jones Industrial Average (DJIA) suffered a significant decline on Friday, fueled by disappointing Nonfarm Payrolls (NFP) figures and a steep drop in consumer sentiment. Additionally, President Donald Trump reignited trade war concerns with new tariff threats aimed at countries imposing tariffs on U.S. goods.
January’s preliminary NFP data revealed a net gain of just 143,000 jobs, falling short of the anticipated 170,000. However, the news wasn’t entirely negative, as December’s NFP numbers were revised upwards to a solid 307,000. Furthermore, the unemployment rate dropped to 4.0% from 4.1%, signaling some positive momentum in the labor market.
On the consumer front, the University of Michigan’s Consumer Sentiment Index plunged to a seven-month low of 67.8 in January, down from the previous 71.1. This sharp decline reflects growing pessimism among U.S. consumers about their economic prospects. Inflation fears are also escalating, with one-year inflation expectations rising to 4.3%, up from 3.3%, and five-year expectations also edging higher to 3.3% from 3.2%.
In a move that rattled markets, President Trump announced new tariffs on China, although these would be largely symbolic and minimal. The President also teased a broader package of reciprocal tariffs targeting multiple countries. His rhetoric has reignited fears of a global trade conflict, which has caused further uncertainty in the markets.
Market sentiment was volatile, swinging between gains and losses before being jolted lower by the latest trade developments. The Dow’s performance was heavily impacted by Amazon’s disappointing forward guidance, despite reporting strong Q4 earnings. Amazon’s stock plummeted by 4% to below $230 per share, further dragging the index down.
The Dow Jones has now seen two consecutive days of losses, dropping 400 points and retreating to the 44,300 range. The index is eyeing a potential move toward the 44,000 mark, with bearish momentum targeting the 50-day Exponential Moving Average (EMA) at 43,730. The failure to maintain momentum above the key 45,000 level has further weakened investor confidence.
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