Stock market news: US stocks tumble over concerns about tariffs, Washington; Dow down nearly 750

NEW YORK -- U.S. stocks fell sharply after reports showed worries about President Donald Trump's policies may be hitting the economy. The S&P 500 sank 1.7% Friday for its worst day in two months. The Dow Jones Industrial Average dropped 1.7%, and the Nasdaq composite tumbled 2.2%. One report suggested U.S. business activity is close to stalling, with optimism slumping because of worries about tariffs and other potential policies from Washington. Reports on consumer sentiment and home sales also came in weaker than expected. Akamai Technologies weighed on the market after giving financial forecasts that fell short of expectations. Treasury yields fell in the bond market.

THIS IS A BREAKING NEWS UPDATE. AP's earlier story follows below.

U.S. stocks are falling sharply Friday after reports showed worries about President Donald Trump's policies may be hitting the U.S. economy.

The S&P 500 was down 1.7% in late trading and heading toward its worst day in two months. The Dow Jones Industrial Average was down 781 points, or 1.8%, and the Nasdaq composite was 2.2% lower, with an hour remaining in trading.

The losses accelerated through the day following several weaker-than-expected reports on the economy. One suggested U.S. business activity is close to stalling, with growth slowing to a 17-month low. The preliminary report from S&P Global said activity unexpectedly shrank for U.S. services businesses, and many in the survey reported optimism slumping because of worries about Washington.

"Companies report widespread concerns about the impact of federal government policies, ranging from spending cuts to tariffs and geopolitical developments," said Chris Williamson, chief business economist at S&P Global Market Intelligence. "Sales are reportedly being hit by the uncertainty caused by the changing political landscape, and prices are rising amid tariff-related price hikes from suppliers."

A separate report said U.S. consumers are also preparing for higher inflation, in part because of potential tariffs that could raise prices for all kinds of imports. They're broadly expecting prices to be 4.3% higher 12 months from now, which is a big jump from their forecast of 3.3% inflation last month, according to a survey by the University of Michigan. That fits with preliminary data the survey suggested earlier this month.

Among U.S. households, though, a divide is evident underneath the surface. Expectations for inflation are rising for political independents and Democrats, while falling slightly for Republicans.

A third economic report, meanwhile, said sales of previously occupied homes were weaker last month than economists expected. Relatively high mortgage rates, along with expensive prices for homes, have been hurting sales.

To be sure, the U.S. stock market is still up for the young year so far and is not far from its all-time high set earlier this week. Virtually no one on Wall Street is forecasting a recession anytime soon. But Friday's reports raise concerns about what's been a remarkably resilient economy, and the losses on Wall Street were widespread.

Stocks of the smallest companies, whose profits can be more closely tied to the strength of the U.S. economy than big multinational rivals, fell more than the rest of the market. The Russell 2000 dropped a market-leading 2.9%.

SEE ALSO: Wall Street falls following Trump's tariffs, but not as badly as feared in the morning

Within the big companies of the S&P 500 index, nearly 4 out of every 5 stocks fell. Everything from Big Tech stocks that have been bid up amid the artificial-intelligence frenzy to airlines to metals companies dropped. Nvidia sank 3.3%. United Airlines lost 6.2%, and Newmont Mining fell 4.7%.

Akamai Technologies had the sharpest drop in the S&P 500, even though the cybersecurity and cloud computing company reported stronger profit for the latest quarter than analysts expected. It lost a fifth of its value and fell 20.9% as investors focused instead on its forecasts for revenue and other financial measures this upcoming year, which fell short of analysts' expectations.

On the winning side of Wall Street was Celsius Holdings, which sells "better-for-you" energy drinks. It leaped 28.4% after saying it agreed to buy Alani Nu, a beverage company that focuses on female customers. Analysts called the purchase price, $1.65 billion net of tax effects, reasonable and said the deal should quickly add to profits for Celsius, which also reported its latest quarterly results.

Other winners included stocks of companies that can provide steadier profits regardless of what the U.S. economy is doing. Water utility American Water Works rose 3.3%, for example.

Before Friday's sharp drop, the S&P 500 had been heading for a week of almost zero movement. Helping to lift stocks had been a steady parade of better-than-expected profit reports. That worked against worries about stubbornly high inflation, which could prevent the Federal Reserve from delivering more relief for the economy and financial markets through lower interest rates.

The Fed has been holding its main interest rate steady after sharply cutting it through the end of last year. Minutes from the Fed's last policy meeting, which were released earlier this week, suggested officials may stay on hold for a while given worries about how Trump's proposed tariffs and mass deportations of migrants, along with other factors, could push upward on inflation.

While lower rates can boost the economy, they can also encourage spending that puts upward pressure on inflation.

Treasury yields fell in the bond market following Friday's weaker-than-expected economic reports. The yield on the 10-year Treasury sank to 4.41% from 4.51% late Thursday, which is a notable move.

In stock markets abroad, indexes were mixed in Europe after rising across much of Asia.

In Japan, the Nikkei 225 rose 0.3% after the government said a key measure of inflation remained above the Bank of Japan's target level last month. That could encourage it to keep raising interest rates.

Hong Kong's Hang Seng jumped 4% for one of the world's largest moves,, boosted by a surge for e-commerce firm Alibaba, which reported stronger profit for the end of last year than expected. It also talked up its artificial-intelligence developments.

AP Business Writers Yuri Kageyama and Matt Ott contributed.