The positives for the U.S. stock market were apparent heading into 2025. As February nears its end, however, the negatives are adding up. Last week, the Dow Jones Industrial Average and Nasdaq Composite suffered their worst weekly performances of the new year, losing 2.5% each. The S & P 500 dropped 1.7%, its second-biggest weekly decline of 2025. Worries about the economy drove those steep losses. The University of Michigan’s consumer sentiment index for February came in weaker than expected as inflation expectations for the next year jumped. S & P Global also said U.S. manufacturing activity grew at a slower-than-expected pace for the month, while the services sector, which makes up more than two-thirds of U.S. economic output, contracted. On top of that, rising global trade tensions are already putting pressure on companies. Walmart said last week that it won’t be spared from the effect of U.S. tariffs on Mexican and Canadian imports. The nation’s largest retailer also said it expects earnings growth to slow. “Investors have been confronted with some surprisingly soft economic data and anecdotally negative commentary on the consumer, and those disappointing reports are raising fears that all the policy-related uncertainty emanating from Washington is starting to cause a loss of momentum,” wrote Tom Essaye of Sevens Report. “This is a market that is still trading near 22x earnings and … that leaves no room for error.” Last week’s declines also led the S & P 500 to test key support levels on price charts. The broad market index briefly dipped below its 50-day moving average before closing just above it. Frank Cappelleri, president of CappThesis, noted that Friday’s move canceled a potential rise to 6,425. “Friday’s decline emphatically negated the latest one, meaning the 6,425 target is no longer in play,” he said in a note. “This is now the second FAILED BULLISH pattern in the last two months. The other was triggered in late November and nullified by the 12/18/24 FOMC hawkish cut.” “Seeing more bullish patterns fail would be a concern and something we’ll be watching closely going forward,” Cappelleri said. JPMorgan’s trading desk is not overly concerned just yet. “While the moves felt very ‘un-windy’ we failed to see panic selling on our Cash Equities desk and saw very little appetite for downside protection/bearish bets on our Equity Derivatives desk,” the bank’s traders said. “This begs the question as to whether there is more to this pullback.” Elsewhere Monday morning on Wall Street, Jefferies upgraded Nike to buy, calling for 50% upside. “As Nike turns back on its innovation engine, channel inventories will be rebalanced and wholesale [distribution] will be increased, setting the stage for accelerating unit volumes and healthier full-price sell through driving stronger revenue growth and rising margins against a backdrop of reduced Street expectations (that are now way too low),” analyst Randal Konik wrote in a Monday note to clients.
The negatives for the stock market are quickly building up
Feb 24, 2025
