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Stocks experienced a downturn on Friday, with declines intensifying as the day progressed. A troubling inflation report coupled with a significant drop in consumer sentiment triggered this sell-off.
By the end of the trading session, the Dow Jones Industrial Average fell by 1.7% to close at 41,583, while the S&P 500 decreased by 2.0% to finish at 5,580. The Nasdaq Composite experienced the largest decline, down 2.7% to settle at 17,322. All three major indexes recorded losses for the week.
The market’s early negative sentiment was largely influenced by the release of the latest Personal Consumption Expenditures Price Index (PCE), which stands as the Federal Reserve’s favored inflation gauge.
Consumer Trends and Economic Indicators
Recent data from the Bureau of Economic Analysis indicated that the headline PCE rose by 0.3% from the previous month and climbed 2.5% year-on-year, aligning with economists’ expectations. However, the core PCE, which omits the often-volatile food and energy prices, recorded an unexpected monthly increase of 0.4%, while its annual rise of 2.8% also exceeded forecasts.
“The PCE figures indicate that inflation continues to be persistent, even as we observe some signs of easing in other areas,” commented Robert Ruggirello, the chief investment officer at Brave Eagle Wealth Management. He noted that the report was based on February data and did not incorporate anticipated inflationary pressures stemming from tariffs, contributing to uncertainty in the economic outlook.
Despite the inflation concerns, Ruggirello is optimistic about the Federal Reserve implementing rate cuts this year, predicting the first reduction may occur in September. Based on insights from CME FedWatch, futures traders anticipate a potential rate cut could happen as soon as the upcoming June meeting.
Declining Consumer Sentiment
Market volatility deepened mid-morning following a report from the University of Michigan, revealing its Consumer Sentiment Index dropped to 57 in March, down from February’s 64.7. This figure was lower than the preliminary estimate of 57.9 and pointed to a third consecutive month of declines for the index.
The report highlighted a broad consensus among various demographic and political groups, reflecting deteriorating expectations related to personal finances, business conditions, unemployment, and inflation since February.
Lululemon Faces Challenges with Investor Sentiment
In company-specific news, Lululemon Athletica (LULU) issued a cautionary outlook, contributing to a significant drop in its stock. While the athletic apparel company posted better-than-expected earnings for the fourth quarter, its forecasts for the full year did not meet Wall Street’s anticipations.
During an earnings call, CEO Calvin McDonald noted a recent survey suggesting that consumers are curtailing spending due to heightened concerns over inflation and the broader economy, leading to slower traffic in retail.
As a result, LULU’s shares plummeted by 14.2%, marking it as the worst performer in the S&P 500 for the day. However, some analysts, including Stifel’s Jim Duffy, maintained a positive outlook, reiterating a Buy recommendation based on Lululemon’s cautious guidance and past performance.
Equinix Receives Analyst Upgrade Amid Market Fluctuations
In the real estate sector, Equinix (EQIX) saw its shares decline by 2.7% despite receiving an upgrade from CFRA Research analyst Kenneth Leon, who boosted the rating to Strong Buy from Hold. Leon highlighted that EQIX’s stock price represents an attractive entry point, especially for investors looking to capitalize on the increasing data center demands from AI and cloud computing sectors.
With a price target set at $985, Leon indicated that this forecast implies a potential upside exceeding 22%, justifying the premium over peer companies operating in the rapidly expanding data center market.
CoreWeave’s Market Debut: A Mixed Success
Furthermore, the performance of CoreWeave (CRWV) attracted attention following its public trading debut. The company priced its initial public offering (IPO) at $40 per share, which was below the initially anticipated range of $47 to $55.
Upon opening, shares traded within a range of $37.50 and $41.89 before concluding the day at $40.00. While this first trading day was not completely unfavorable, retail investors might prefer to exercise caution given current market volatility.
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