Stock Market Nosedives Amid Inflation Jitters

The stock market took a major hit this week. All major indexes dropped sharply. The S&P 500 fell nearly 2%, while the Nasdaq and Dow also plunged. Inflation data triggered the sell-off, with the Fed’s preferred gauge—the core PCE—rising 0.4% in a month. Year-over-year, it hit 2.8%, well above the Fed’s 2% target.

This inflation jump spooked investors. It also cast doubt on hopes for rate cuts later this year. The Fed has held rates steady for two meetings, but high inflation may force them to wait longer. Even Fed Chair Jerome Powell’s reassurance that inflation is “transitory” isn’t convincing traders anymore. Now, with prices rising and growth slowing, investor confidence is fading fast.

UBS Cuts S&P 500 Target as Tariffs Bite

UBS just joined the list of firms slashing their S&P 500 targets. The Swiss bank now sees the index ending 2025 at 6,400, down from 6,600. The reason? Tariffs. President Trump’s 25% levy on auto imports, plus looming reciprocal tariffs, are hitting sentiment hard. UBS says policy uncertainty will keep the stock market volatile for now.

Still, the bank hasn’t given up on stocks completely. It expects a recovery later this year if trade policy becomes clearer and AI investments pay off. UBS sees tech as the most promising sector, thanks to AI growth. But in the short term, earnings could suffer. That means more bumps ahead for investors.

Stock Market Faces Triple Threat: Inflation, Tariffs, and Weak Sentiment

This week’s decline wasn’t just about inflation. It was also about tariffs and falling consumer sentiment. The University of Michigan’s sentiment index hit its lowest point since late 2022. Add to that rising prices and uncertain trade policies, and the stock market had nowhere to go but down.

Tech stocks got hit the hardest. Big names like Amazon and Alphabet lost over 3%. Lululemon plunged 14% after warning about consumer spending. When tech leads a sell-off, it often signals deeper trouble. And now, bond yields are falling as investors flee to safety. That’s another red flag for stocks.

FED Holds Steady as Economic Outlook Darkens

The Federal Reserve is standing still, and that’s making investors nervous. Despite growing signs of economic stress, the Fed hasn’t changed interest rates. Policymakers say they’re waiting for more data. But with inflation holding steady and tariffs piling on pressure, markets are running out of patience.

UBS and other firms now see slower growth and higher inflation sticking around. GDP growth forecasts have dropped to just 2% for 2025. Inflation, on the other hand, is expected to stay above the Fed’s 2% target. The central bank’s “wait-and-see” approach might buy time—but it’s costing the stock market in the short term.

Stock Market Outlook

Volatility is now the stock market’s new normal. With so much uncertainty—tariffs, inflation, Fed inaction—investors don’t know where to turn. Outflows from US stock funds are rising, and even traditionally strong months like April may not offer relief this year.

But not everyone is bearish. Some strategists say this extreme investor fear could signal a rebound later in the year. Historically, when sentiment hits bottom, stocks often bounce back. For now, though, patience is key. Until the Fed moves or trade tensions ease, expect more turbulence in the stock market.