The Dow Jones Industrial Average (DJIA) pulled back on Friday, erasing part of the week’s strong gains and dipping below 46,000 after briefly hitting fresh record highs earlier in the week. Weakening US consumer sentiment and rising long-term inflation expectations weighed on investor mood ahead of the Federal Reserve’s key policy decision next week.
Fed Meeting in Focus as Labor Market Weakens
The Federal Reserve is widely expected to cut rates on September 17, with markets leaning toward a 25-basis-point move as soft labor market data outweighs near-term inflation concerns. The decision will be accompanied by an updated Summary of Economic Projections (SEP), giving investors fresh clues on the Fed’s outlook for growth, employment, and inflation.
On Friday, the Dow retreated about 0.4%, sliding toward 45,900 after Thursday’s historic close above 46,000. Despite the late-week pullback, equities have staged a strong run in September — a month that usually carries a bearish bias. The Dow has gained more than 500 points since Monday, finishing the week with a solid 1.1% advance.
Consumer Sentiment Deteriorates on Trade and Inflation Concerns
The University of Michigan’s (UoM) Consumer Sentiment Index fell sharply to 55.4 in September, down from 58.2 previously, underscoring household concerns about the economy. While outlook for durable goods improved, most components slipped — particularly among middle- and lower-income groups.
Survey participants flagged vulnerabilities in the labor market, business conditions, and inflation pressures, with more than 60% of respondents citing the negative impact of tariffs introduced by the Trump administration.
Joanne Hsu, Director of the UoM Surveys of Consumers, noted:
“Trade policy remains highly salient to consumers… Still, sentiment remains above April and May 2025 readings, immediately after the initial announcement of reciprocal tariffs.”
Inflation expectations reflect lingering caution. The 1-year outlook held steady at 4.8%, while the 5-year expectation climbed to 3.9%, marking a second consecutive monthly increase but still below the 4.4% peak recorded in April.
The Dow gave up ground Friday as weaker consumer sentiment and stubborn inflation expectations tempered optimism. Still, with the Fed expected to begin cutting rates next week, equities remain broadly supported, keeping investors focused on policy shifts rather than short-term volatility.
