Market Selloff: Tech Stocks Sink as Investors Turn Defensive

Wall Street reels as consumer confidence plunges, inflation fears surge, and trade tensions weigh on markets.

Editorial Team (ET)July 27, 2025

U.S. stocks suffered a sharp decline as consumer confidence took its steepest drop in four years, sparking concerns over economic stability. The S&P 500 slid 0.9%, while the Nasdaq Composite tumbled 1.8%, extending a four-day losing streak for both indices. The downturn comes amid mounting fears that inflation and trade tariffs will weigh heavily on economic growth.

The Conference Board’s consumer confidence index plummeted to 98.3 in February, significantly below Wall Street’s forecast of 102.5. This marks the most dramatic drop since August 2021 and signals increasing unease among American consumers about the economy’s future.

Inflation Expectations Surge as Prices Rise

One of the biggest concerns fueling market jitters is the surge in inflation expectations. The survey revealed that Americans anticipate inflation to hit 6% over the next 12 months, a sharp rise from the previous forecast of 5.2%. Factors contributing to this spike include persistently high prices for household staples, rising energy costs, and fears over additional tariffs.

“This increase likely reflected a mix of factors, including sticky inflation but also the recent jump in prices of key household staples like eggs and the expected impact of tariffs,” said Stephanie Guichard, senior economist at The Conference Board.

Defensive Stocks Shine as Tech Takes a Hit

As investors sought safer ground, defensive stocks surged. Consumer staple giants like Campbell’s, Colgate-Palmolive, and Dr Pepper each posted gains exceeding 2%. These companies typically perform well during economic slowdowns as demand for their products remains steady.

Conversely, technology stocks bore the brunt of the selloff. Tesla plunged 7.8%, while Palantir and AppLovin fell 3.6% and 8.6%, respectively. The Magnificent Seven tech stocks also suffered losses, as investors rotated out of high-growth sectors in favor of lower-volatility options.

Trade Tariffs Add to Economic Uncertainty

Adding fuel to the fire, President Donald Trump reaffirmed his plan to impose a 25% tariff on all Canadian and Mexican goods, with implementation expected next week. The move has already sent commodity prices soaring, particularly aluminum, which is critical to multiple industries.

This latest round of tariffs, coupled with an already fragile economic backdrop, has heightened concerns among market watchers. Société Générale strategist Andrew Lapthorne noted that investor sentiment is shifting toward defensive stocks, reflecting growing uncertainty about future U.S. growth.

Market Outlook: A Rough Road Ahead?

With consumer confidence waning, inflation rising, and trade tensions escalating, the stock market appears poised for continued volatility. Investors are increasingly hedging against downturns, with demand for defensive assets growing. The Federal Reserve’s next policy moves will be critical in shaping market direction, as interest rate decisions could either fuel or dampen fears of an economic slowdown.

For now, the message from Wall Street is clear: uncertainty is back, and investors should brace for more turbulence in the weeks ahead.

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