Friday, 28 March marked a rough end to the quarter, with U.S. equities retreating sharply as inflation came in hotter than markets had priced, consumer confidence cratered, and trade tensions crept back into view.
Markets Slide as Q1 Ends on a Sour Note
The Nasdaq bore the brunt of the selling. The Composite index slid 2.7% to 17,322.99, while futures (NQ1!) settled 2.67% lower at 19,457. That made it three consecutive losing sessions and a 14% drawdown from December highs. The index officially entered correction territory, a clear sign that sentiment around tech had turned.
The broader backdrop offered little reassurance. Persistent inflation continued to keep Fed pivot hopes at bay, sentiment took a hit, and trade tensions resurfaced. Together, these forces left big tech under pressure with little sign of relief heading into Q2.
The selling was widespread, but some names stood out for specific reasons.
Alphabet (GOOGL) had recently topped earnings expectations but fell as revenue came in light. Amazon (AMZN) struggled under the weight of inflation and weakening consumer spending. Meta (META) also declined, reflecting broader pressure on ad-driven platforms.
Tesla (TSLA) gave back part of its recent rebound, while Microsoft (MSFT) continued to underperform. Apple (AAPL), meanwhile, remained caught in the broader volatility sweeping through the tech sector.
Nvidia (NVDA) fared slightly better but still closed lower. Chip stocks more broadly stayed under pressure, with the PHLX Semiconductor Index (SOX) extending a two-month slide as AI enthusiasm cooled and trade concerns resurfaced.
Inflation Data Sparks Renewed Uncertainty
The pressure stemmed from a familiar trio: firm inflation data, fresh tariff threats, and a sharp drop in consumer confidence. That was enough to accelerate a rotation out of growth and into safety.
Some analysts remain constructive on select tech names with strong balance sheets and defensible margins. But in the near term, the outlook remains murky. For now, the sell-off appears far from finished.
The inflation data released Friday morning did little to calm nerves. The core Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, rose by 0.4% in February, the largest monthly increase since January 2024. Year-over-year, core PCE climbed to 2.8%, up from 2.7% in January and still well above the Fed’s 2% target.
Headline PCE was more restrained, rising 0.3% month-on-month and 2.5% annually, broadly in line with expectations. But the firmer core reading, along with rising consumer inflation expectations, added another layer of complexity. Rate cut hopes, already fragile, took another hit.
Spending data painted a mixed picture. Personal consumption rose 0.4%, just shy of forecasts, while personal income jumped 0.8%, doubling expectations. The personal savings rate increased to 4.6%, the highest since June 2024. All figures are from the U.S. Bureau of Economic Analysis’ February 2025 Personal Income and Outlays report. The report offers a snapshot of consumer behaviour, income strength, and inflation trends at the end of Q1.
Reactions to the data were mixed, but a cautious tone emerged among economists. Morgan Stanley’s Ellen Zentner summed it up with a stark assessment, as reported by Reuters:
This wasn’t an exceptionally hot report, but it likely keeps the Fed in wait-and-see mode, especially given the uncertainty surrounding Trump’s trade policy.
Consumer Sentiment Drops to 2022 Lows
That sense of uncertainty was reinforced by a fresh drop in sentiment. The University of Michigan’s Consumer Sentiment Index fell to 57 in March, its lowest reading since November 2022. Survey respondents pointed to rising concerns over inflation, job security, and the broader economic outlook.
One particularly unwelcome detail: short-term inflation expectations among consumers climbed to their highest level in more than two years. Both data points were reported in the University of Michigan’s latest survey, as covered by CNBC.
All Eyes on Trump’s 2 April Tariff Announcement
Attention is now turning to 2 April, when President Trump is expected to unveil a sweeping new tariff package aimed at narrowing the United States’ goods trade deficit, which reached $1.2 trillion in 2024, according to the Wall Street Journal.
Earlier in the week, Trump proposed a 25% tariff on all auto imports. The move drew immediate pushback from allies and reignited fears of global retaliation.
Edward Jones strategist Angelo Kourkafas suggested the 2 April announcement may not be a one-off: “It’s an important milestone, but uncertainty will remain.”
