[New York Stock Market] S&P 500 Drops 1% Amid Inflation and Reciprocal Tariff Setbacks...

Major Stock Indices Close Down Around 1%
Expected Inflation Surges by 1 Percentage Point
Trump's Reciprocal Tariff Announcement Adds Pressure

The three major stock indices on the New York Stock Exchange closed down by around 1%. Investor sentiment worsened as U.S. consumers' expected inflation surged unusually, and President Donald Trump announced plans to impose reciprocal tariffs on multiple countries next week.

On the 7th (local time in the U.S.), the Dow Jones Industrial Average closed at 44,303.40, down 444.23 points (0.99%) from the previous session at the New York Stock Exchange (NYSE). The Standard & Poor's (S&P) 500 index fell 57.58 points (0.95%) to 6,025.99, and the Nasdaq Composite index plunged 268.59 points (1.36%) to close at 19,523.40.

On this day, a flood of sell orders emerged as U.S. consumers' one-year expected inflation rose unusually sharply. According to the University of Michigan, the preliminary consumer sentiment index for February this year was 67.8. This represents a 4.6% decrease from the confirmed figure of 71.1 in January and also falls short of the market expectation of 71.1.

The market reacted particularly sensitively to the one-year expected inflation. The one-year expected inflation for February was 4.3%, up 1 percentage point from 3.3% in the previous month. This is the highest level since November 2023 and marks a significant increase for two consecutive months. According to the University of Michigan, over the past 14 years, there have been only five instances where the one-year expected inflation rose by more than 1 percentage point within a single month.

Following the release of these indicators, the three major stock indices in New York all turned sharply downward. The Nasdaq index initially increased by up to 0.36% during the session but dropped nearly 1 percentage point within an hour. The unusual rise in one-year expected inflation caused U.S. Treasury yields to surge, weighing down the major indices. The reciprocal tariff measures announced by Trump in the afternoon added further downward pressure on the market.

Trump told reporters at the White House that day, "We plan to announce (about reciprocal tariffs) after a meeting on Monday or Tuesday next week."

Although Trump referred to it as reciprocal trade, it was interpreted in context as reciprocal tariffs. This means imposing taxes on imports entering the U.S. at the same rate that exporting countries impose tariffs on U.S.-made goods. Trump emphasized that he is particularly considering tariffs on automobiles, calling it a very important issue.

Following this news, massive sell-offs occurred mainly among major technology companies. Apple fell 2.40%, Microsoft dropped 1.46%, and Tesla and Alphabet also recorded declines in the 3% range. The move to impose reciprocal tariffs also worsened investor sentiment among traditional industrial stocks and blue-chip stocks. Among the 30 components of the Dow Jones index, only Nvidia, Visa, Coca-Cola, and Chevron showed slight gains, while all other stocks declined.