S&P 500 Plunges After Inflation Data. Are Tariffs to Blame?

Published: March 28, 2025 by Omor IE

Key Points

The stock market is down sharply this morning as key inflation data comes in.
The inflation data came in largely in line, but certain metrics were hot.
The market is not pleased, especially with tariffs taking effect next week.

The stock market opened lower again today as investors waited for key inflation data to come in. The report today showed that inflation was still ticking up, though mostly in line with expectations. However, certain reads still came in higher than expected, and market sentiment remains tense since higher inflation could mean that there will be no rate cuts this year.

Yesterday, other important macro data came in, with Q4 2024 GDP data showing 2.4% annualized growth. This is higher than the estimated 2.3%, but the market still closed red yesterday since we’re seeing tariff-related volatility this year, which is expected to start impacting the economy in Q1 2025. Atlanta Fed estimates GDP to contract by 1.8% in Q1 2025.

Here’s a market update as of 10:00 A.M (ET) today.

The S&P 500 is down 32 points, or 0.56%.
The Nasdaq Composite is down 136.88 points, or 0.769%.
Dow Jones Industrial Average is down 313.59 points, or 0.74%.

Core Inflation Data Comes In

The Federal Reserve watches this metric to decide on rate hikes and rate cuts, and it came in higher than expected. U.S. Feb core PCE hit 2.8% year-over-year in February (0.4% month-over-month).

This is stronger than expectations of 0.3% month-over-month and 2.7% year-over-year.

Consumer spending accelerated 0.4%. This came in below the 0.5% forecast but was driven by a 0.8% increase in personal income, which is double the 0.4% estimate. Many fear that this is part of a broader “wage-price spiral.”

The impact of it remains slightly bearish on the market since the Fed is still waiting to cut interest rates. Two rate cuts are expected later this year, and that may not happen if data keeps coming in hot.

Comments from the Fed also weren’t very encouraging. Boston Fed President Collins said that tariffs would inevitably boost inflation. Richmond Fed President Barkin said that trade policies have created instability in the business community.

Tariffs Next Week

Reciprocal tariffs are expected to go into effect next week on April 2nd. Starting April 3rd, Trump’s recently-announced 25% tariff on auto imports will go into effect. This will not impact car parts, but those will also be subject to 25% tariffs from May 3rd.

The market has mainly sold off in the past few weeks due to these tariffs. Temporary relief did come in when the administration indicated that tariffs would be much more selective and autos would be spared, but Trump’s recent tariffs and comments that these tariffs were “permanent” are causing the bearish sentiment to drag on.

Moreover, many believed that tariffs were simply a negotiating tactic and would be paused or canceled before the deadline, but that may not be the case as we’re so close to the deadline.

Other Assets

Gold: Rallied sharply today and is up 1%. It could break above $3,100 if uncertainty continues.
Natural Gas: Down 1.56%.
Crude Oil: Down 0.6%.
Bitcoin: Down sharply, 3.2%.