Wall Street closes lower on trade war escalation

All three US stock indexes closed lower on Friday after President Donald Trump said he plans to announce reciprocal tariffs on many countries next week, following weak jobs and consumer sentiment data.

Trump did not identify which countries would be hit but suggested it would be a broad effort that could also help solve US budget problems.

"Today, the tone was set early with the payroll report and very quickly people ignored that as soon as tariff conversations started coming back in," said Mark Hackett, chief market strategist at Nationwide.

Markets had a dismal start to the week when Trump announced sweeping trade tariffs over the weekend, before he suspended the levies on goods from Mexico and Canada on Monday for a month. A host of strong earnings in recent days offset the weak start.

Earlier in the day, a survey showed US consumer sentiment dropped unexpectedly in February to a seven-month low and inflation expectations rocketed, with households seeing inflation over the next year surging to 4.3 per cent - the highest since November 2023.

Another report showed US job growth slowed more than expected in January after robust gains in the prior two months, although a 4.0 per cent unemployment rate will likely give the Fed cover to hold off cutting interest rates at least until June.

The final employment report under former president Joe Biden's administration showed 598,000 fewer jobs were created in the 12 months through last March than previously estimated. The final payrolls benchmark revision, however, was less than the reduction of 818,000 jobs estimated back in August.

The Dow Jones Industrial Average fell 444.23 points, or 0.99 per cent, to 44,303.40, the S&P 500 lost 57.58 points, or 0.95 per cent, to 6,025.99 and the Nasdaq Composite lost 268.59 points, or 1.36 per cent, to 19,523.40.

All three indexes were down for the week, with the Dow breaking a three-week streak of gains and ending 0.54 per cent lower. The S&P fell 0.24 per cent while the Nasdaq was down 0.53 per cent.

All 11 S&P 500 sectors traded lower on Friday, with consumer discretionary leading losses with a roughly 2.5 per cent fall.

Uber jumped 6.6 per cent after billionaire hedge fund manager Bill Ackman disclosed a large stake in the company.

Amazon.com dipped 4.1 per cent due to weakness in the retailer's cloud computing unit, Amazon Web Services, and lower-than-expected forecasts for first-quarter revenue and profit.

The Cboe Volatility Index, known as Wall Street's fear gauge, rose 6.6 per cent on Friday to 16.3.

Traders of short-term interest-rate futures now expect the Fed to cut interest rates just once this year, backing away from earlier bets on two rate cuts starting in June.

Among other movers, Expedia rose 17.3 per cent after the online travel platform posted better-than-expected fourth-quarter results.

Elf Beauty tumbled 19.6 per cent after the cosmetics company cut its annual net sales and profit forecasts.

Declining issues outnumbered advancers by a 2.79-to-1 ratio on the NYSE. There were 162 new highs and 104 new lows on the NYSE.

On the Nasdaq, 1,241 stocks rose and 3,145 fell as declining issues outnumbered advancers by a 2.53-to-1 ratio.

Volume on US exchanges was 15.06 billion shares, compared with the 14.91 billion average for the full session over the last 20 trading days.