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Market Commentary - Foreign Markets

Global markets decline as U.S. indices fall sharply, consumer sentiment worsens, and inflation expectations spike. Treasury yields rise, housing and retail sectors weaken.

Markets Tumble Amid Consumer Sentiment Drop, Rising Inflation Expectations

10-Feb-2025, 11:23
The Nasdaq dove 268.59 points (1.3%) to 19,523.40, the Dow tumbled 444.23 points (1%) to 44,303.40 and the S&P 500 slumped 57.58 points (1%) to 6,025.99.

The University of Michigan said its consumer sentiment index slumped to 67.8 in February after rising to 71.1 in January. Economists had expected the index to inch up to 72. The deterioration by consumer sentiment came as year-ahead inflation expectations spiked to 4.3% in February from 3.3% in January, reaching the highest level since November 2023.

Stocks saw further downside after President Donald Trump said he plans to announce reciprocal tariffs on many countries next week, with the U.S. imposing tariffs on imports equal to the rates imposed on American exports. The Labor Department report said non-farm payroll employment rose by 143,000 jobs in January compared to economist estimates for an increase of about 170,000 jobs. It also said the unemployment rate dipped to 4% in January from 4.1% in December.

Housing stocks were substantially weak amid notable increase by treasury yields, dragging the Philadelphia Housing Sector Index down by 2.7%. Retail stocks were significantly weak as reflected by the 2.4% slump by the Dow Jones U.S. Retail Index. Amazon tumbled by 4.1% weighing on the sector, after reporting better than expected fourth quarter results but providing disappointing sales guidance for the current quarter. Biotechnology, semiconductor and software stocks too were considerably weak while airline stocks were among the few groups to buck the downtrend.

Asia-Pacific stocks turned in a mixed performance. Japan's Nikkei 225 Index slid by 0.7%, while China's Shanghai Composite Index jumped by 1.0%. The major European markets all moved lower on the day. The German DAX Index fell by 0.5%, the French CAC 40 Index declined by 0.4% and the U.K.'s FTSE 100 Index dipped by 0.3%.

In the bond market, treasuries showed a notable move to the downside, extending the modest pullback seen on Thursday. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.7 bps to 4.48%.