The stock market struggled as it approached the weekend, with a series of economic reports raising worries about unexpected slow growth and persistent inflation.
After reaching a record high on Wednesday, the S&P 500 (^GSPC) ended the week down roughly 1.7%, driven by a bleak forecast from Walmart (WMT) and inflation-related concerns. The Nasdaq Composite (^IXIC) dropped about 2%, while the Dow Jones Industrial Average (^DJI) was the hardest hit, declining nearly 3%.
Nvidia’s (NVDA) earnings report scheduled for after the market closes on Wednesday is anticipated to be the highlight of the upcoming week, with additional attention on reports from Home Depot (HD), Lowe’s (LOW), and Salesforce (CRM).
On the economic front, investors will be monitoring the release of the Federal Reserve’s preferred inflation measure, the “core” Personal Consumption Expenditures (PCE) index, which is due out on Friday. Additionally, a revised estimate of fourth-quarter gross domestic product (GDP) and updates on consumer confidence and housing prices are also expected.
With inflation remaining above the Federal Reserve’s target and a robust labor market, there are indications that rates may not decrease in the first half of 2025.
A significant update regarding inflation will arrive on Friday with the January PCE report. Economists anticipate that annual “core” PCE, which excludes the often-volatile food and energy sectors, will show a 2.6% increase in January, down from 2.7% in December. Month-over-month, a 0.3% rise is expected, slightly higher than December’s 0.2%.
Owing to differing components, the data is likely to indicate a slower price increase for January compared to the Consumer Price Index (CPI), which reported the largest core price increase since April 2023.
Michael Gapen, chief US economist at Morgan Stanley, noted that a 2.6% rise in core PCE for January “indicates a significant reduction in the annual core inflation pace,” aligning with their prediction of a quarter-percentage-point interest rate cut from the Fed in June.
The much-anticipated quarterly results for the market’s AI favorite, Nvidia, are expected after the market’s close on Wednesday. Analysts project adjusted earnings per share of $0.84, reflecting a 63% increase year-over-year, with revenue expected to reach $38.26 billion, up 73% from last year’s same quarter.
Investors are curious to hear insights from Nvidia CEO Jensen Huang regarding the demand landscape for AI chips and whether he will discuss potential competitive threats emerging from China’s DeepSeek.
This report comes amid a trend where several key tech stocks, referred to as the “Magnificent Seven,” including Nvidia, have not kept pace with the S&P 500 this year and are contributing less to the overall index gains compared to the previous two years.
“Post-results volatility is likely for the stock, but we expect a positive trajectory to resume as investors anticipate Nvidia’s promising product pipeline (GB300, Rubin) and market expansion into robotics and quantum technologies at the upcoming GTC conference on March 17,” noted Bank of America analyst Vivek Arya in a client note.
Although stocks have shown resilience amidst various headlines regarding President Donald Trump’s policies, concerns have started to emerge in different survey indicators.
The University of Michigan’s consumer sentiment survey index hit its lowest level since November 2023 early on Friday, while S&P Global’s flash US composite PMI recorded its lowest output in 17 months.
Both reports highlighted worries about tariffs and their potential inflationary impact.
“The positive sentiment among US businesses at the start of the year seems to have diminished, giving way to a more troubling outlook characterized by heightened uncertainty, stagnating business activity, and rising prices,” commented Chris Williamson, chief economist at S&P Global Market Intelligence. “Firms are expressing widespread concerns about the implications of federal government policies, including spending cuts, tariffs, and geopolitical events.”
Williamson further noted that expectations for the upcoming year have turned “somewhat gloomy since the pandemic.”
On Friday, stocks experienced a sell-off, with the S&P 500 and Dow both falling over 1.7%, and the Nasdaq Composite dropping more than 2%. Although this reflects just one day of decline in a market that has been sustaining near-record highs, the market movement indicates a level of anxiety among investors at present.
Given the near-record high valuations, Scott Chronert, Citi US equity strategist, advised Yahoo Finance that the market may face a bumpy road ahead in 2025 as investors assess the effects of Trump’s policies.
“We believe there is still room for the S&P to grow between now and year-end,” Chronert stated. “However, it is likely that this period will involve ongoing volatility and apprehension that keeps us on the lookout for corrections and more favorable purchasing opportunities.”
Economic data: Chicago Fed activity index, January (0.15 prior); Dallas Fed manufacturing activity, February (14.1 prior);
Earnings: Chegg (CHGG), Cleveland-Cliffs (CLF), Diamondback Energy (FANG), Domino’s Pizza (DPZ), Hims & Hers (HIMS), Riot (RIOT), Trip.com (TCOM), Zoom (ZM)
Economic data: FHFA house price index, month-over-month, December (0.3% prior); S&P CoreLogic CS 20-city year-over-year, non-seasonally adjusted, December (4.33% prior); Conference Board Consumer Confidence, February (103.5 expected, 104.1 prior); Richmond Fed manufacturing index, February (-4 prior);
Earnings: American Tower (AMT), AMC (AMC), Cava (CAVA), First Solar (FSLR), The Home Depot (HD), Instacart (CART), Intuit (INTU), Keurig Dr. Pepper (KDP), Krispy Kreme (DNUT), Lemonade (LMND), Lucid (LCID), Planet Fitness (PLNT), Workday (WDAY)
Economic data: MBA Mortgage Applications, week ending Feb. 21 (-6.6 prior); New home sales month over month, January (-2.7% expected, +3.6% previously); Building permits month-over-month, January final (+0.1% prior)
Earnings: Nvidia (NVDA), Anheuser-Busch InBev (BUD), Advance Auto Parts (AAP), C3.ai (AI), Clear Secure (YOU), Lowe’s (LOW), Marathon Digital Holdings (MARA), NRG Energy (NRG), Salesforce (CRM), Snowflake (SNOW), Stellantis (STLA)
Economic data: Fourth quarter GDP, second revision (+2.3% annualized rate expected, +2.3% previously); Fourth quarter personal consumption, second revision (+4.2% previously); Initial jobless claims, week ended Feb. 22, (219,000 previously); Durable goods orders, January preliminary (+2.2% expected, -2.2% previously)
Earnings: Archer Aviation (ACHR), Clover (CLOV), Duolingo (DUOL), Norwegian Cruise Line (NCLH), Toronto-Dominion Bank (TD), SoundHound AI (SOUN), Vistra Corp. (VST)
Economic data: PCE inflation, month over month, January (+0.3% expected, +0.3% previously); PCE inflation, year over year, January (+2.5% expected, +2.6% previously); “Core” PCE, month over month, January (+0.3% expected, +0.2% previously); “Core” PCE, year over year, January (+2.6% expected; +2.8% previously); MNI Chicago PMI, February (39.5 prior)
Earnings: fuboTV (FUBO)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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