New York
CNN
 — 

On Thursday, U.S. stock markets experienced a downturn after the leading retailer warned of a turbulent year ahead in 2025, anticipating a decline in sales amid concerns that consumers have reached their financial limits.

A disappointing forecast from Walmart (WMT) led to a significant drop in the Dow, falling more than 650 points (1.5%) before settling 451 points down. The S&P 500 and Nasdaq Composite saw decreases of 0.43% and 0.47%, respectively, while Walmart’s stock ended the day with a 6.5% decline. This market slump reflects investor concerns about a potential dip in consumer spending, which constitutes approximately two-thirds of the economy, as shoppers tighten their budgets in response to rising prices.

Walmart’s Chief Financial Officer, John David Rainey, acknowledged the “uncertainties surrounding consumer behavior and various global economic and geopolitical factors” during his statements on Thursday.

Persistent inflation and prolonged high interest rates are putting pressure on American consumers, a situation that may worsen if President Donald Trump implements the increased tariffs he has proposed.

In the initial month of his presidency, Trump announced a 10% tariff on all goods imported from China, as well as a 25% tariff on steel and aluminum. He has also indicated plans to introduce tariffs on Mexico and Canada starting in March and has tasked his economic advisors with exploring “reciprocal tariffs” with all trade partners.

Despite Walmart’s significant scale offering some protection from tariffs and price pressures, its anticipated slowdown serves as a warning sign that 2025 may pose challenges for smaller retailers and the retail sector overall.

Recent data revealed that retail sales declined by 0.9% last month, as consumers scaled back spending across numerous categories, according to the Commerce Department. This decrease was a stark contrast to December, dropping significantly lower than economists’ forecasts of a 0.4% reduction. These figures have been adjusted for seasonal variances but not for inflation.

Meanwhile, inflation expectations among Americans for the upcoming year rose this month to the highest level recorded since November 2023, as shown in the latest consumer survey by the University of Michigan. In addition, consumer sentiment has significantly dropped.