Weekend Update - 3|2|25
It was a roller coaster week for the stock market, particularly for NASDAQ. Though, the index was down 4% for the month and 3.5% for the week and about 4% drop in February. Many technology stocks were slammed due to fear of tariff, fear of uncertainty and sectorial rotation. This was the Nasdaq’s worst month since April 2024. The S&P 500 declined roughly 1% for the week and 1.4% in February. Meanwhile, the DOW managed to outperform, rising about 1% in the week. Overall, it was a painful week for the tech stock investors.
What really happened to the Stock Market?
The week’s downturn was fueled by mounting economic concerns and a shift in investor sentiment. The Consumer confidence data released Tuesday, February 25, showed a sharp drop—the Conference Board’s index fell to its lowest since August 2021—raising fears of slowing consumer spending. Jobless claims jumped unexpectedly midweek, and GDP growth for Q4 2024 was confirmed to have cooled, amplifying recession worries. A key trigger was Nvidia’s (NVIDA) earnings report on Wednesday, February 26, which beat revenue expectations but slightly lower gross margins, sparking an 8.5% plunge in its stock on Thursday and wiping out $274 billion in market value. This dragged down the broader tech sector, with ripple effects across the Nasdaq. Trump’s tariff threats continued to loom, though no major new policy announcements hit this week. On Friday, the major benchmarks turned negative for a short period on Friday after Trump, along with Vice President JD Vance, argued with Zelenskyy during an extraordinary moment in front of the media at the White House. However, the market managed to bounce back. The good news was that Personal Consumption Expenditure (PCE) report was released on Friday. It was up 2.5% year over year and up 0.3% month-over-month, both were as per Wall Street expectations. This helped the market to bounce back to some extent but enough damage was done for the tech stocks.
My thoughts: Almost all the economic reports that have come in last few weeks have not been favorable for the stock market. Furthermore Donald Trump’s tariff fear and uncertainty have further panicked the market. There is nothing positive for the market and hence difficult to predict how the market will shape in the near term. There are few key economic reports expected this week. If those are positive then we can see some bounce otherwise market may remain very volatile. Having said that, I think those who are invested for a long term should not be too concerned. It seems to me like a short-term bump on the road. Because this market is going to bounce back sooner or later once the uncertainty is abated. Also, in the later part of the year, there would be deregulations, mergers and acquisitions and if inflations comes down the we should see a major turnaround in the market. Finally, we are all on the same boat and sometime there are good times and bad times.This phase should get over sooner or later but caution is warranted at this time. Let's be patient and not get too emotional.
Economic Report
- MONDAY, MARCH 3: ISM Manufacturing Report
- WEDNESDAY, MARCH 5: ADP employment, ISM Service Report
- FRIDAY, MARCH 7: U.S. Jobs report
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