U.S. stocks, after showing some early strength, shifted into the red around mid-morning and remained there for the remainder of the day as renewed fears about inflation took center stage.

Initially, stocks saw an upswing, seemingly ignoring the unexpected increase in average hourly wages revealed in the latest jobs report. However, they could not overlook a rise in consumer inflation expectations reported in the University of Michigan’s sentiment survey, along with fresh tariff threats from President Donald Trump.

On Friday, Trump mentioned he would be announcing retaliatory tariffs next week affecting various countries, although he did not clarify which ones. Many economists are opposed to tariffs, arguing they could exacerbate inflation.

Meanwhile, consumer concerns about inflation have risen. The University of Michigan’s consumer sentiment survey for February indicated that inflation expectations for the next year surged to 4.3% from the previous month’s 3.3%. This was the highest level recorded since November 2023, marking two months of significant increases, according to the survey’s director, Joanne Hsu.

“This marks only the fifth occasion in 14 years where we’ve witnessed such a drastic one-month leap (one percentage point or more) in one-year inflation expectations,” Hsu noted. “The current level notably exceeds the 2.3-3.0% range we observed in the two years preceding the pandemic.”

The S&P 500 index ended the day down by 0.95%, a decline of 57.58 points, closing at 6,025.99; the Dow Jones Industrial Average fell by 0.99%, or 444.23 points, to 44,303.40, while the tech-heavy Nasdaq saw a drop of 1.36%, falling 268.59 points to 19,523.40. The yield on the benchmark 10-year Treasury note climbed to 4.489%.

No Change in Fed Rate Policy Expected

Economists assert that new inflation concerns and uncertainties around tariffs, along with a positive jobs report, will keep the Federal Reserve’s interest rate strategy unchanged for the foreseeable future.

In January, the economy added 143,000 jobs, falling short of the Dow Jones economists’ average prediction of 169,000. However, previous months saw upward revisions totaling 100,000, presenting a stronger picture of the labor market by the end of 2024. Notably, December’s figures were adjusted up to 307,000 from 256,000, marking the highest gain in nearly two years.

The unemployment rate dropped to an eight-month low of 4.0% in January, better than expectations that it would remain steady at December’s 4.1%. Over the past year, average hourly wages increased by 4.1%, outpacing general inflation, which hovers near 3%, and surpassing economists’ average projection of 3.7%, according to Dow Jones.

“This essentially provides the Fed with little incentive to cut interest rates anytime soon,” said Seema Shah, chief global strategist at Principal Asset Management. “Furthermore, the policies of the Trump administration could greatly influence both the labor market and inflation forecasts, justifying the decision to keep rates steady for now.”

Stephen Brown, deputy chief North America economist at Capital Economics, believes the Fed will maintain its current stance throughout the year. Bank of America economists also noted that the jobs report reinforces their belief that the cycle of Fed rate cuts has concluded.

Due to the renewed concerns over inflation and decreasing expectations for rate cuts by the Fed, Treasury yields have risen.

Amazon’s Earnings and AI Initiatives

After the market closed on Thursday, Amazon reported that its earnings in the last quarter exceeded expectations; however, the outlook for revenue growth fell short of analysts’ estimates. The company’s forecast of 5% to 9% growth in the first quarter of this year would represent the lowest growth rate in its history.

As a result, Amazon’s stock dropped by 4.05%.

The online retail giant also announced plans to invest significantly in artificial intelligence this year, benefiting companies like Nvidia, which supplies AI technology. Nvidia’s shares saw a slight increase.

Corporate Sector Highlights

• Loan service provider Affirm reported quarterly revenue that exceeded expectations, with the total value of transactions on its platform exceeding $10 billion for the first time. Shares climbed by over 21.81%.
• Pinterest stated that it reached an all-time high in monthly active users and anticipates stronger revenue than analysts expected for the current quarter. Its shares surged nearly 19.08%.
• E.l.f. Beauty announced a downgrade in its annual sales forecast, leading to a 19.7% drop in its shares.
• Expedia shares jumped 17.27% after reporting substantial holiday booking increases in the last quarter of the year.
• Shoe manufacturer Skechers fell short of earnings expectations for the last quarter of 2024, resulting in a 12.7% decline in its shares.
• Take-Two Interactive reported a smaller-than-anticipated quarterly loss and suggested that the upcoming release of “Grand Theft Auto VI” this fall would enhance its financial standing. Its shares rose by 14.03%.
• Billing software company Bill’s quarterly revenue forecast was below expectations, causing its shares to plummet by 35.56%.
• Tesla’s car sales in China experienced an 11.5% decline last month, leading to a 3.39% decrease in its shares.
• Microchip Technology shares dipped 2.3% after forecasting lower sales and profits for the last three months of the previous year than analysts had predicted.
• Fortinet shares increased by 2.81% following the cybersecurity firm’s forecast indicating full-year revenue expected to exceed analysts’ predictions.

Bitcoin Update

Bitcoin prices also retreated from early gains and fell below the significant $100,000 mark.

The cryptocurrency reflected the stock market’s downturn as concerns over inflation increased, which diminished expectations for a Fed rate cut during its next meeting in March. The CME FedWatch tool indicates a 91.5% probability of no rate change.

Bitcoin’s latest trading value stood at a decline of 0.56%, at $96,045.35.

This story was updated with new information.

Medora Lee is a reporter covering finance, markets, and personal finance.