The Week That Was, The Week Ahead: Macro & Markets, February 23, 2025

Everything to Know about Macro and Markets

Another eventful week saw main stock indexes close in the red. The Dow Jones Industrial Average (DJIA) dropped by 2.51%, while the S&P 500 (SPX) lost 1.66%. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) registered weekly declines of 2.51% and 2.26%, respectively.

The Beginning of a Correction?

The first part of the holiday-shortened week saw the S&P 500 reach its second and third record highs this year. However, sentiment took a hit after Walmart’s (WMT) muted guidance added fuel to investor worries over the economic outlook, sparked by weaker-than-expected data, the prospects of a trade war, and ongoing geopolitical uncertainties.

Walmart’s 2026 fiscal year projections pushed stocks sharply lower on Thursday, weighing heavily on the Dow and the broader consumer-related stock universe. The retail giant projected lower-than-expected sales in the ongoing fiscal year due to “uncertainties related to consumer behavior and global economic and geopolitical conditions.” Additionally, on Friday, the blue-chip index was rattled by news that the U.S. Department of Justice is investigating UnitedHealth’s (UNH) Medicare billing practices.

Still, other major indexes remained flat to moderately higher, supported by mega caps, with both Nasdaq benchmarks reaching intraday all-time highs early on Friday. However, concerns over the impact of slowing economic growth on earnings, coupled with elevated stock valuations, triggered profit-taking, pushing all key indexes deep into negative territory by Friday’s close. Market volatility was significantly amplified by the magnitude of this month’s options expiry, as approximately $2.7 trillion in U.S. stock market derivatives tied to equities and ETFs expired on Friday.

Currently, analysts remain largely unshaken, with opinions regarding last week’s market developments ranging from “consolidation” to “the beginning of a healthy correction.” Given the strong two-year rally, a correction is to be expected. Moreover, the shift in market leadership this year – where defensives such as Consumer Staples, Utilities, and Healthcare have replaced cyclicals like Technology and Communication Services at the market’s helm – could provide a new catalyst for continued gains.

Fears of Stagflation Return

Several recent economic reports revealed cracks in the economy’s resilience. January’s housing market index fell to a five-month low, housing starts declined, and existing home sales dropped. Meanwhile, S&P Global reported that U.S. service-sector activity entered contraction territory, with its lowest PMI reading in over two years, overshadowing a continued rebound in manufacturing activity.

Analysts have also raised concerns over the effect of the Trump administration’s sweeping federal layoffs on the job market, adding to worries about consumption growth that were first sparked by Target, widely seen as a retail bellwether. These concerns were underscored by January’s consumer sentiment index, which fell to its lowest reading since November 2023, as household inflation expectations surged amid fears that tariffs would drive up prices.

President Trump announced his intent to impose additional tariffs on automobiles, pharmaceuticals, and lumber products as soon as April 2^nd, signaling that these tariffs would be set at 25%. Transportation and airline stocks were particularly hard-hit, while rising policy uncertainty – combined with signs of economic weakness – pressured the broader market.

The Federal Reserve’s recent meeting minutes indicated that policymakers were prepared to hold rates steady, citing a “high degree of uncertainty” surrounding the economic outlook. Rate committee members expressed concerns about potential inflationary pressures stemming from the proposed tariffs and strong consumer spending.

However, the recent softness in economic data may force the central bank’s hand. Although many analysts caution that one set of data points does not necessarily reflect the economy’s overall health, mentions of “stagflation” – an economic condition characterized by low growth and high inflation – are becoming more frequent. A series of weaker-than-expected data points could increase the likelihood of further monetary support, as a slowdown in consumption might help curb inflation.

Stocks That Made the News

▣ UnitedHealth Group (UNH) dropped by more than 9% over the week following media reports that the Justice Department is investigating the health insurer over its Medicare billing practices. The DoJ has not confirmed the investigation, while UNH strongly rebutted the report.

▣ Walmart (WMT) fell by over 8% despite strong FQ4 results and a dividend hike, as its forecast for the current fiscal year disappointed. On Friday, WMT had its worst day since November 2023.

▣ Palantir Technologies (PLTR) tumbled by nearly 18% as reports indicated that Defense Secretary Pete Hegseth directed an 8% annual reduction in the Pentagon’s budget over the next five years. Given Palantir’s substantial revenue from government contracts, this news raised concerns about future earnings.

▣ Super Micro Computer (SMCI) was one the S&P 500’s best performers, rising nearly 7% on the week despite Friday’s drop. The AI server maker rallied on analyst price-target increases and the expectations that it will be able to comply with reporting deadlines to avoid Nasdaq delisting.

▣ Another notable outperformer was Analog Devices (ADI), with a weekly increase of over 9%. This was driven by an earnings beat and optimistic outlook, followed by several analyst price-target increases.

Upcoming Earnings and Dividend Announcements

Over 85% of the S&P 500 companies have already reported, and the Q4 2024 earnings season is in its final stretch. However, many notable earnings releases are still scheduled for this week.

The highlight of the week will be Nvidia’s (NVDA) quarterly results, scheduled for release on Wednesday. In addition, reports in focus are arriving from Oneok (OKE), Public Storage (PSA), Intuit (INTU), American Tower (AMT), Workday (WDAY), Salesforce (CRM), eBay (EBAY), Dell Technologies (DELL), Vistra Energy (VST), Monster Beverage (MNST), and NetApp (NTAP).

Ex-dividend dates are coming this week for Skyworks Solutions (SWKS), Phillips 66 (PSX), Microchip (MCHP), Amcor (AMCR), Equinix (EQIX), Delta Air Lines (DAL), NextEra Energy (NEE), Goldman Sachs (GS), and other dividend-paying firms.

For additional exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.