S&P 500 Hit With Weekly Losses After Renewed Tariff Jitters in U.S. Stock Market

The U.S. stock market ended lower, with the S&P 500 erasing its weekly gain as investors grew anxious over President Donald Trump's plans to introduce reciprocal tariffs.

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The benchmark S&P 500 index dropped 0.9% by the close, finishing the week with a 0.2% decline, according to Dow Jones Market Data. This marked the end of a three-day winning streak and resulted in back-to-back weekly losses for the large-cap index.

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Investor sentiment turned cautious after Trump signaled that he would unveil details on reciprocal tariffs in the coming week. The uncertainty surrounding these potential trade measures led to increased market volatility, reflected in the Cboe Volatility Index, or VIX, which surged 6.7% on Friday to 16.54. Earlier in the session, the index had been in decline but reversed course as concerns mounted.

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Louis Navellier, chief investment officer at Navellier, commented in an email that market volatility could persist until there is more clarity on tariffs. He also noted that investors might experience heightened uncertainty going into weekends, given the administration's pattern of making major announcements during that time.

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Alongside the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite also closed significantly lower on Friday, both recording weekly declines.

This was not the first time markets faced turbulence over trade concerns. The previous Friday, stocks had also fallen ahead of the weekend as Trump prepared to impose tariffs on Canada, Mexico, and China. However, the administration later put the planned tariffs on Mexico and Canada on hold.

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The economic impact of the tariffs remains uncertain, with analysts debating whether they will ultimately help or hurt the U.S. economy. Bob Elliott, CEO and chief investment officer of Unlimited Funds, noted that much depends on how foreign nations react.

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“The biggest risk is the potential retaliation against U.S. exporters,” Elliott said in a phone interview. “If other countries decide to reduce their purchases of U.S. goods in response to these tariffs, that could have a direct negative impact on GDP.”

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Despite these trade concerns, recent economic data suggests that the U.S. economy has been growing at a steady pace. In a statement released on January 29, the Federal Reserve acknowledged that economic expansion remains solid. That same day, the central bank announced it would pause its cycle of interest rate cuts, citing moderate inflation and a strong labor market.

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During a press conference following the Fed’s decision, Chair Jerome Powell emphasized that policymakers were closely monitoring the effects of White House policies, including tariffs, immigration, fiscal measures, and regulatory decisions.

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Elliott pointed out that tariffs present a challenging scenario for the Federal Reserve because they can simultaneously push up domestic prices while slowing economic growth, making it harder for the central bank to set appropriate monetary policy.

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Meanwhile, economic indicators on Friday provided mixed signals. The University of Michigan’s consumer sentiment survey revealed an increase in inflation expectations for the year ahead. Additionally, the latest U.S. jobs report showed that the unemployment rate fell to 4% in January, with wages rising at a faster pace.

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In the bond market, Treasury yields moved higher on Friday as investors factored in the latest economic data along with ongoing trade tensions. The yield on the 10-year Treasury note increased by 4.6 basis points to 4.483%, according to Dow Jones Market Data.

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Looking ahead, analysts remain cautious about how markets will navigate the tariff situation. Scott Chronert, an equities analyst at Citigroup, expressed confidence that the S&P 500 could absorb the impact of tariffs while balancing other policy factors. However, he also warned against complacency, advising investors to stay mindful of potential volatility in the months to come.

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