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US stocks tumble as deepening consumer gloom raises stagflation fears

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US stocks tumble as deepening consumer gloom raises stagflation fears

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Wall Street stocks dropped on Friday as signs of strain among American consumers added to worries the US is heading for a bout of stagflation.

A batch of data on Friday added fresh evidence that consumers are growing deeply concerned about how Donald Trump’s sweeping tariffs will affect the world’s largest economy, while a separate report showed the Federal Reserve’s preferred inflation measure rose in February.

The gloomy data comes at a time when investors are worried that Trump’s trade levies combined with a broader sense of uncertainty will hurt US economic growth while also increasing price pressures. The new reports sent investors rushing away from US equities and into havens.

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Wall Street’s blue-chip S&P 500 was down 2 per cent during mid-afternoon trading on Friday while the tech-focused Nasdaq Composite was 2.6 per cent lower. US government debt rallied, pushing the 10-year Treasury yield down 0.11 percentage points to 4.26 per cent.

“US data is only inflaming stagflation fears,” said James Knightley, an economist at investment bank ING. “Hot inflation and cooling consumer spending are trends that are likely to be intensified by President Trump’s aggressive moves on tariffs and government spending cuts.”

A survey by the University of Michigan released on Friday showed that consumer sentiment plunged in March as Americans worried about their job prospects, inflation and income levels. Households also forecast inflation over the long term of 4.1 per cent, the highest since 1993.

“This month’s decline [in sentiment] reflects a clear consensus across all demographic and political affiliations,” the University of Michigan said.

It added: “Republicans joined independents and Democrats in expressing worsening expectations since February for their personal finances, business conditions, unemployment and inflation.”

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Consumer spending, meanwhile, rose 0.4 per cent last month, a reversal from January’s 0.3 per cent decline, but not as strong as the 0.5 per cent increase economists forecast, a separate report from the US Bureau of Economic Analysis showed.

Pantheon Macroeconomics’ senior US economist Oliver Allen said the consumer spending data was “disappointing” and that an “underlying slowdown in demand growth also seems to be under way”.

Goldman Sachs cut its forecast for first-quarter GDP in response to the weak data, by 0.4 percentage points to an annualised growth rate of 0.6 per cent, citing “softer than expected” personal spending growth in February and a downward revision to January’s figure.

The Atlanta Fed also cut its running forecast for first-quarter GDP to show a contraction of 2.8 per cent on an annualised basis, compared with 1.8 per cent as recently as Wednesday. Its model has contrasted with Wall Street banks, which broadly still expect growth in early 2025.

The BEA’s report on Friday also showed that the core reading of the personal consumption expenditure (PCE) price index was up 2.8 per cent in February from a year ago.

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Economists expected the index, a measure that is closely watched by the Fed which strips out food and energy, to be up 2.7 per cent, unchanged from January’s upwardly revised rate. The main PCE index rose 2.5 per cent last month, unchanged from January.

The Fed earlier this month boosted its forecast for inflation and cut its growth outlook. Fed chair Jay Powell said at the time that the US economy was still in good shape and the central bank did “not need to be in a hurry” to cut interest rates after reducing them by 1 percentage point last year.

However, the president of the Chicago branch of the Fed, Austan Goolsbee, told the Financial Times this week that the central bank was no longer on the “golden path” of 2023 and 2024 when inflation appeared to be returning to the 2 per cent target without derailing economic growth or lifting unemployment.

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Israel expands Gaza ground offensive after days of air strikes

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Israel expands Gaza ground offensive after days of air strikes

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Israel said on Saturday that it was expanding a new ground offensive in Gaza, with troops closing in on the enclave after days of air strikes that have killed hundreds of Palestinians.

Defence minister Israel Katz said the renewed fighting was forcing Hamas to soften its stance in talks being held in Qatar to secure the release of the remaining hostages being held in captivity in Gaza — part of an Israeli strategy of “negotiations under fire”.

A Hamas official told Reuters that a new round of talks was under way on Saturday.

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Palestinians fear the new offensive is the precursor to a plan approved on May 5 by Israel’s security cabinet, under which most of the besieged enclave would be occupied by the Israeli military and 2.1mn Palestinians would be forced into a small area by the border with Egypt.

“The Palestinian cause is navigating one of its gravest and most perilous junctures,” Egypt’s President Abdel Fattah al-Sisi told an Arab League summit. Israel is engaged in a “deliberate endeavour to forcibly displace [Gaza’s] inhabitants under untold horrors of war”, he said.

Egypt fears an exodus of Palestinians into its territory. NBC News reported that the US is negotiating with Libya to take in as many as 1mn Palestinian refugees.

At least 250 Palestinians have been killed in the last two days, health officials in Gaza said, with hundreds more wounded.

Israel has blocked any food, medicine or fresh water from entering Gaza for the last two and half months, pushing hundreds of thousands of Palestinians into starvation, a UN panel said earlier this week.

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The full extent of the offensive was unclear on Saturday. Residents reported machine gun fire in parts of Gaza and Israeli media said tanks had been massed on the border. Israeli warplanes dropped flyers over some parts of Gaza with a reference to the biblical story about Moses parting the sea.

“The Israeli army is coming,” the flyer, shared widely on social media, said.

Israel stepped up the intensity of its air strikes earlier this week as US President Donald Trump wrapped up his Gulf tour.

Israeli officials had earlier referred to his trip as a “window of opportunity” to broker a swap of Israeli hostages for Palestinian prisoners that would be acceptable to Prime Minister Benjamin Netanyahu and his far-right allies.

In the event, Trump only negotiated the release of a single Israeli soldier, who is also an American national.

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An estimated 20 hostages and the bodies of as many as 38 more are still being held by Hamas, which has refused to release them without a complete ceasefire and the full withdrawal of Israeli forces.

Katz said Hamas’s return to negotiations was evidence that neither a ceasefire nor the resumption of humanitarian assistance to Gaza was necessary for negotiations to succeed.

UN Secretary-General António Guterres warned that Israel’s siege was “beyond description, beyond atrocious and beyond inhumane”.

“A policy of siege & starvation makes a mockery of international law,” he said on X.

His remarks came days after UN Under-Secretary General for Humanitarian Affairs Tom Fletcher warned of a looming “genocide” in Gaza — the first time a senior UN official has publicly used such language.

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Israel rejects Fletcher’s characterisation. It says it has blocked the aid to prevent it from being stolen by Hamas.

More than 53,000 Palestinians have been killed since the war began, most of them women and children, according to local health officials.

At least 1,200 people were killed in Israel in Hamas’s cross-border attack on October 7 2023 and 250 taken hostage, according to Israeli officials.

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More than 20 dead after tornadoes sweep through Kentucky and Missouri

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More than 20 dead after tornadoes sweep through Kentucky and Missouri

Storm damage is surveyed in Laurel County, Ky., after tornadoes brought destruction to the region Friday night.

Laurel County, Ky. Fiscal Court/Facebook/Screenshot by NPR


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Laurel County, Ky. Fiscal Court/Facebook/Screenshot by NPR

Powerful storms and tornadoes tore through several Midwestern and Southern states overnight Friday, leaving carnage and flattened buildings in their wake.

In Kentucky at least 24 people have died. Authorities say 23 of those deaths occurred in London, Ky., in the southeastern part of the state, with some people still unaccounted for.

A message shortly after 8 a.m. ET from Gov. Andy Beshear called for prayers for the affected families. But less than an hour later, the number of known deaths had already risen by 10.

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In Missouri, there are at least seven dead — five in the St. Louis area and two others in a more rural part of the state, south of the capital.

Responders there are still searching homes and buildings for survivors, and officials are asking people to stay out of the impacted areas to allow crews to do their work.

According to PowerOutage.us, the storms left nearly a half million customers without power in dozens of states from Missouri to Maryland.

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This is a developing story and will be updated.

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Putin’s peace theatre keeps Trump watching — and Kyiv waiting

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Putin’s peace theatre keeps Trump watching — and Kyiv waiting

In parallel to a brutal war along a 1,000km front, Russia and Ukraine are locked in a titanic diplomatic battle to persuade Donald Trump that the other is the real impediment to peace. 

So Vladimir Putin took a big risk over the last week, slow rolling US negotiators over a peace proposal, according to officials familiar with the discussions, then refusing to turn up for talks with Ukraine’s President Volodymyr Zelenskyy in Turkey that he himself had publicly initiated.

So far, the Russian leader’s refusal to engage on terms set by others has been met with little resistance — and certainly not enough to compel concessions or alter the course of his war.

The clearest sign of that came when US President Donald Trump seemed to excuse the Russian leader’s no-show on Thursday and simultaneously questioned the whole point of the Russia-Ukraine talks, saying: “Nothing’s gonna happen until Putin and I get together.”

It was a gift to Putin, who has long sought a one-on-one meeting with a president determined to normalise US-Russian relations. For the Ukrainians, it revived their worst fears — that Trump will seek to cut a deal with Putin over their heads and sell Ukraine down the river. 

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“Putin is doing just enough to convince Trump that he is engaged in this effort to find peace in Ukraine, while also doing as much as possible to make sure it goes nowhere,” said a senior European diplomat involved in the negotiations between western capitals. “And Trump is falling for it.”

That suspicion is shared by some of America’s closest allies. Putin, German defence minister Boris Pistorius said this week, was “trying to lead the American president down the garden path” by refusing to come to Istanbul. “I’m pretty sure that the American president can’t be happy about that,” he told reporters in Berlin.

(2nd left to right) US secretary of state Marco Rubio, Turkish foreign minister Hakan Fidan and Andriy Yermak, head of the Ukrainian president’s office, in Istanbul on Friday © Arda Kucukkaya/Turkish Foreign Ministry via Getty Images

Putin’s reluctance to take part in substantive peace negotiations has become clearer in recent days, even to those in the Trump administration who had been inclined to give him the benefit of the doubt.

On Thursday last week, senior Russian officials told Steve Witkoff, Trump’s special envoy, that Putin did not want to discuss the 22-point peace plan that Witkoff had drawn up with Ukrainian and European input, three people briefed on the discussions told the FT.

Those 22 points were discussed at length the following day on a call between Ukrainian and US officials, according to people familiar with the matter. Ukraine was represented on the call by Zelenskyy’s chief of staff, Andriy Yermak, and Ukrainian defence minister Rustem Umerov; the US by Witkoff, Secretary of State Marco Rubio, who is also currently serving as national security adviser, and Gen Keith Kellogg, Trump’s special envoy for Kyiv.

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Russia’s response resulted in Witkoff, who has met Putin for talks four times since February, postponing provisional plans to meet the Russian leader this week, the people said. A person close to Witkoff said no trip had been planned.

Russian President Vladimir Putin greets US special envoy Steve Witkoff (left) prior to their talks in Moscow on April 25
Russian President Vladimir Putin greets US special envoy Steve Witkoff (left) prior to their talks in Moscow on April 25 © Kristina Kormilitsyna/Pool/AFP/Getty Images

In the days that followed, the pace of diplomatic activity picked up. European and Ukrainian leaders met to call for an unconditional, 30-day ceasefire in the war, warning Putin of tough new sanctions if he failed to comply — a demand supported by the US.

Putin rejected the demand but came back with his own counterproposal — direct Russia-Ukraine talks, to be held on Thursday in Istanbul. Trump welcomed the idea and urged Zelenskyy to take part. The Ukrainian leader acceded to his request and challenged Putin to come to Turkey himself for what would have been only the second in-person meeting between them. 

But the Russian leader refused and sent a low-level delegation instead, led by his former culture minister Vladimir Medinsky.

The meeting, held on Friday, wrapped up after less than two hours, without a breakthrough. The two sides agreed to swap thousands of prisoners-of-war, but made no progress on a lasting ceasefire.

European leaders expressed their frustration. “The past few hours have shown that Russia has no interest in a ceasefire and that, unless there is increased pressure from the Europeans and Americans to achieve this outcome, it will not happen spontaneously,” said French President Emmanuel Macron said, referring to new sanctions.

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“People in Ukraine and across the world have paid the price for Putin’s aggression in Ukraine and across Europe, now he must pay the price for avoiding peace,” said UK prime minister Sir Keir Starmer.

Starmer, Macron, German Chancellor Friedrich Merz and Polish Prime Minister Donald Tusk ended up issuing a joint statement saying Putin’s position was “unacceptable”.

The four leaders, together with Zelenskyy, also held a joint phone call with Trump. Starmer said there was now “a high level of co-ordination” between a core of four countries — the UK, France, Germany and Poland — “and the US administration of President Trump” on Ukraine.

Ukrainian President Volodymyr Zelenskyy arrives to speak to the media after his meeting with Turkish President Recep Tayyip Erdoğan on Thursday in Ankara, Turkey
Ukrainian President Volodymyr Zelenskyy arrives for a press conference after meeting Turkish President Recep Tayyip Erdoğan in Ankara, Turkey on Thursday © Getty Images

“It is just drip, drip, drip,” said one European foreign minister, referring to Europe’s messaging to the Trump administration in the hope the president eventually shifts position on Russia.

But so far that European rhetoric has not been matched by anyone in the Trump administration, which has continued to express frustration with both sides in the conflict, without singling out Russia, and hint that it could walk away.

Rubio said on Thursday that Trump was “willing to stick with this as long as it takes to achieve peace”. “What we cannot do, however, is continue to fly all over the world and engage in meetings that are not going to be productive,” he said.

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A senior Ukrainian official described the situation as Putin and Zelenskyy being locked in a geopolitical game of “blackjack” — with Trump as the dealer.

Putin held a “strong but risky” hand, the official said. Ukraine is betting that if he draws one more card, the Russian president could go “bust”.

Additional reporting by George Parker in Tirana

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