Markets began the week apprehensively as Trump revived his tariff threats aimed at Mexico and Canada. Nevertheless, analysts have mostly disregarded the recent sell-off that saw Wall Street face its most difficult trading day of the year on Friday, as inflation concerns and economic anxiety weighed heavily on major indexes.
On Monday, the Dow (^DJI) managed to close with a slight gain of about 0.1%, while the S&P 500 (^GSPC) dropped 0.5% after erasing earlier gains. The Nasdaq (^IXIC) experienced a notable decline of approximately 1.2%, impacted by Palantir (PLTR) shares, which fell another 11% due to reports about government budget reductions.
Tom Lee, Fundstrat’s head of research, noted in a client memo on Monday that “a combination of factors contributed to the decline from Thursday to Friday,” highlighting Walmart’s (WMT) weak guidance amid rising consumer spending worries, alongside the potential economic repercussions of tariffs and Microsoft’s (MSFT) decision to cancel certain data center leases.
“While these concerns are valid, we believe they are likely only ‘flesh wounds’ to the overall health of these equities,” Lee stated, identifying several positive catalysts emerging in the days ahead.
At close: February 24 at 4:50:39 PM EST
^DJI ^GSPC ^IXIC
Lee anticipated that the Nvidia (NVDA) earnings on Wednesday would likely offer a positive boost to equities, while Friday’s PCE data may suggest that inflation is subsiding.
The likelihood of an interest rate cut in May has also doubled recently, reflecting concerns regarding consumer softness, while simultaneously reminding us that the Fed’s ‘put’ is still in play.
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
“In summary: Investors are ‘buying the dip’ as projections for 2025 appear more optimistic than anticipated,” Lee remarked, pointing out that there’s a cash reserve of $7 trillion waiting to be invested.
Since the beginning of the year, stocks have generally moved higher, with the S&P 500 setting two record highs just last week. Remarkably, the index has gone 35 sessions without recording consecutive declines of over 1%, according to Bloomberg data, marking the longest such streak since late December, and a phenomenon seen only three times in the past year.
“Since November, there’s been a significant influx into the market,” said Michael O’Rourke, chief market strategist at JonesTrading, during an interview with Yahoo Finance on Monday. “There’s been a very bullish sentiment, yet all these optimistic Trump policies still have a long way to manifest.”
