Concerns about the economy are growing among Americans, causing a sense of unease to spread through Wall Street.
Consumer confidence dropped sharply in February, falling 7 points to 98.3 from 105.3 in January, the largest decline in over four years.
The decline, as measured by The Conference Board's closely watched index, was significantly worse than the 103 drop that economists had forecasted, according to FactSet.
The seven-point dip marked the largest month-to-month decline since August 2021.
The news caused the S&P 500 to drop by 0.6% in midday trading, and the technology-focused Nasdaq plummeted 1.1%.
The growing risk of a global trade war, driven by Donald Trump's tariff policies.
Steady despite Trump's calls for reductions.
The share of consumers preparing for a recession over the next year has reached a nine-month high, according to a report released on Tuesday.
The consumer confidence index evaluates Americans' views on both current economic circumstances and their expectations for the next six months.
Consumer spending makes up approximately two-thirds of all US economic activity and is closely followed by economists as an indicator of the American consumer's sentiment.
The report showed that Americans' short-term outlook for income, business, and the job market decreased by 9.3 points to 72.9.
The Conference Board notes that a reading below 80 can indicate a possible recession in the near future.
Pundits attributed this decline in consumer optimism to the new administration's economic measures.
"Americans are growing increasingly pessimistic about the future," Christopher Rupkey, chief economist at FWDBONDS, said to Reuters.
"No federal government has ever previously threatened mass firings of government employees, and this is beginning to frighten consumers greatly," he said about the mass layoffs of federal workers.
'The economy may come to a complete standstill in the first quarter of the year due to consumers choosing to stay at home.'
The Conference Board observed that 'comments about the current administration and its policies were the main focus of the responses' received in its survey this month.
"Consumers have become increasingly pessimistic about future business conditions and less confident about their future income," the group stated.
'Concerns about future job prospects have reached their highest level in ten months, with a pessimistic outlook.'
As the year drew to a close in 2024, consumers became increasingly confident and ended the year on a high note, splurging during the holiday season.
US retail sales plummeted in January, with cold weather being partly responsible for a decline in vehicle sales and purchases at retail stores.
reported last week.
The Federal Reserve has adopted a more cautious stance on interest rates, as inflation continues to persist.
The Federal Reserve maintained its key interest rate unchanged at its most recent gathering, following three consecutive rate reductions.
Government officials have also expressed doubts about the policies of the new administration.
Recent economic data and a growing sense of pessimism among American households are casting a negative outlook on the US economy, according to experts.
"We anticipate a slowing economy due to all the indicators pointing to declining consumer and business confidence and sentiment," said Carl Weinberg, chief economist at High Frequency Economics, in a note to clients.
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