US stocks fall as consumer confidence sinks most in four years

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Wall Street stocks declined on Tuesday after a round of gloomy data on consumer confidence deepened investors’ concerns that Donald Trump’s tariffs will knock the world’s biggest economy.

The blue-chip S&P 500 index fell 0.5 per cent and the tech-heavy Nasdaq Composite dipped 1.1 per cent in afternoon trading in New York — with selling easing somewhat following sharper declines earlier in the day.

US stocks had risen sharply after Trump’s election in November on hopes he would enact pro-business economic policies, pushing the S&P 500 to a record high as recently as last Wednesday.

But a series of disappointing reports on everything from consumer sentiment to home sales has sent the S&P 500 sliding for the past four days.

The Conference Board’s closely watched measure of consumer confidence slid 7 points in February to 98.3, the steepest decline since August 2021 and far worse than the 102.5 Wall Street anticipated.

Consumers’ short-term outlook for the economy fell for the first time since June 2024 below the threshold that usually signals a recession ahead.

At the same time, the report showed average 12-month inflation expectations surged to 6 per cent from 5.2 per cent.

“This increase likely reflected a mix of factors, including sticky inflation but also the recent jump in prices of key household staples like eggs and the expected impact of tariffs,” said Stephanie Guichard, a senior economist at The Conference Board.

Guichard added: “There was a sharp increase in the mentions of trade and tariffs . . . most notably, comments on the current administration and its policies dominated the responses.”

JPMorgan economist Abiel Reinhart echoed that sentiment, saying: “It appears that political headlines are starting to cause a pullback in sentiment.”

Investors are growing “increasingly uncomfortable” about a growing list of negative economic data and a potential hit to US growth from Trump’s unpredictable tariff announcements, said Charlie McElligott, a derivatives strategist at Nomura.

He added that Nomura clients had in recent days increased their purchases of derivatives known as options, which would become valuable if the S&P 500 falls sharply.

Defensive stocks including drinks maker Dr Pepper, canned soup group Campbell’s and toothpaste manufacturer Colgate-Palmolive all rose more than 2 per cent on Tuesday as investors shifted into pockets of the market that typically outperform when the economy cools.

US government debt, which tends to rise during times of growing market angst, gained in price, sending yields down. The 10-year Treasury yield fell 0.09 percentage points to 4.3 per cent, the lowest level since mid-December.

Tech stocks, which have surged in recent years and typically perform well during economic boom times, slid. Peter Thiel’s data analytics company Palantir shed 2.3 per cent, Tesla fell 7.8 per cent and digital ad group AppLovin lost 8.6 per cent.

“This US rotation looks defensive,” said Société Générale’s Andrew Lapthorne, who highlighted how investors are increasingly shifting away from growth stocks in the tech sector to “low volatility” stocks in healthcare, utilities and consumer staples. 

The weak economic figures and worries about Trump’s tariff plans also sent oil prices falling to a two-month low on Tuesday.

Brent crude, the global benchmark, fell by 2.6 per cent to $72.81 a barrel, while West Texas Intermediate, the US marker, slipped 2.7 per cent to $68.68.

“The weak consumer confidence number was a demand destruction event for crude and gasoline,” said Robert Yawger, commodity analyst at Mizuho Securities, an investment bank. 

Additional reporting by Jamie Smyth in New York