21/02/2025 Economic Uncertainty Triggers Major Drop in U.S. Stock Market

Here are the key reasons behind the significant drop in the U.S. stock market yesterday:

1. Weak Economic Data:
The U.S. Services PMI (Purchasing Managers' Index) dropped to 49.7, signaling a contraction in the services sector for the first time in 25 months. This fueled concerns about an economic slowdown.

2. Rising Inflation Expectations:
According to the Michigan Survey, long-term inflation expectations (5 to 10 years) rose to 3.5%, the highest level since 1995. This increased uncertainty about the Federal Reserve's monetary policy, negatively impacting investor sentiment.

3. Decline in Consumer Sentiment:
The Consumer Sentiment Index for February came in at 64.7, the lowest since November 2023, suggesting a potential slowdown in consumer spending and amplifying fears of an economic downturn.

4. Policy Uncertainty:
Reports that former President Donald Trump was considering additional tariffs on certain goods heightened market uncertainty, influencing corporate investment decisions.

5. Concerns over a New Coronavirus:
News of a newly discovered coronavirus strain in China raised fears of potential global economic impacts, further dampening investor sentiment.

These factors combined to create heightened anxiety among investors, leading to a significant drop in the major U.S. stock indices.