US stocks are under pressure from Trump's tariffs. The market is focused on CPI data and inflation expectations.

The uncertainty of Trump's tariff policy has recently impacted the US stock market. Investors are concerned about the potential impact of tariffs on consumers and the overall economy, leading to continued low market sentiment. Against this backdrop, the upcoming release of the Consumer Price Index (CPI) data for February is highly anticipated, as investors hope to determine whether current concerns about stagflation are justified. According to a survey of economists by foreign media, the CPI in the US is expected to rise by 0.3% month-on-month in February, with the annual growth rate dropping from 3.0% to 2.9% compared to the previous month. The core CPI (excluding food and energy prices) is expected to increase by 0.3% month-on-month and grow by 3.2% year-on-year. Market analysts believe that if the CPI data is higher than expected, coupled with the possibility of Trump's tariff policy exacerbating inflation, the Federal Reserve may be forced to slow down its rate-cutting pace. This could deepen the stock market sell-off, potentially bringing the Nasdaq index closer to the bear market territory. However, if the CPI data is moderate or lower than expected, it may boost investors' confidence in the Fed's rate cuts and uplift market sentiment. Nonetheless, Kathleen Brooks, Research Director at XTB, stated that the market may have difficulty stabilizing unless Trump relaxes some of the policies that are causing serious economic impacts. Wall Street generally believes that Wednesday's CPI data is just a preliminary reflection of the impact of Trump's tariffs on inflation. In February, Trump imposed a 10% tariff on Chinese goods, with China being a significant importer of household goods, clothing, and electronics. Economists at Bank of America, Stephen Juneau, and Jeseo Park, pointed out that this could raise inflation in the US. However, there are still uncertainties surrounding Trump's tariff policy, and investors may need more time to see its full impact in the CPI data. If there is a notable increase in this CPI data due to tariff factors, it may trigger widespread market risk aversion, which would be bearish for both bond and stock markets. In addition to CPI data, the market will also closely monitor the University of Michigan Consumer Inflation Expectations Index, which will be released on Friday. This data will help evaluate consumers' inflation expectations for the next year. The index jumped from 3.3% to 4.3% last month, the highest level since November 2023, and the fifth time in the past 14 years to show such a significant monthly increase. Tani Fukui, Senior Director of Global Economic and Market Strategy at MetLife Investment Management, believes that caution is needed when interpreting this index, as consumers' inflation expectations are often influenced by short-term price fluctuations. She stated that if consumers' inflation expectations rise significantly, it may further depress the stock market, affecting consumer spending and leading to a vicious cycle. However, if the changes are mild, they may not have a significant impact on the market. On Tuesday, all three major US stock indexes fell. The Dow Jones Industrial Average dropped 478 points, or 1.14%, the S&P 500 fell by 0.76%, and the Nasdaq index fell by 0.18%.