The Dow Jones Industrial Average (^DJI) slid 1.69% or 748.58 points on Friday, February 21, 2025 amid worrying economic data. Here is a deep dive into why the markets tumbled, and what to watch out for this week.
Market Tumbles
The week ending February 21, 2025, was a bad one for stock investors. The Dow closed 2.87% lower that week, while the S&P 500 lost 1.71% or 104.39 points on Friday and 1.67% over the week.
Worries hit fever pitch on Friday regarding oncoming headwinds after Walmart beat earning estimates, but issued a cautious guidance for fiscal 2026. The 2.5% tumble by Walmart (WMT), the 2.59% drop by Goldman Sachs (GS), and the 0.96% decline by JPMorgan (JPM) weighed down on the Dow.
Trump’s Tariffs And Cuts Send Shocks Across The Market
One of the biggest threats to the stock market is Trump’s planned tariffs. Companies like General Motors (GM) have been forced to make considerable changes to their business in light of Trump’s policies. Recently, Trump announced plans to cut the Pentagon’s budget by 8%, which sent Palantir’s (PLTR) stock tumbling 4.59% on Friday.
Markets were already reeling following Trump’s heated exchange with Ukraine, which heightened geopolitical fears. Meanwhile, Gold climbed to a new high as investors’ appetite for risk waned.
Gloomy Economic Data
A Friday report by the National Association of Realtors® revealed that previously-owned homes’ sales had declined 4.9% in January from December. It signals buyers are still struggling with high mortgage rates, and elevated prices in many parts of the US.
Meanwhile, The Consumer Sentiment Index by the University of Michigan (UM), which was released on Friday, showed a sharp decline in February from January 2025. According to the survey, long-term inflation expectations were at their highest since 1995.
The index fell to 64.7 in February 2025, down from 71.7 in January and below the 76.9 reported in February 2024. This sharp decline can be attributed to the tariff announcement on January 31 targeting Mexico, China, and Canada.
In short, consumers in the world’s largest economy are facing problems, and it is having a wide-ranging impact on the overall stock market.
What To Watch Out For This Week
Some of the most important data investors will be looking out for include the S&P CoreLogic Case-Shiller National Home Price Index that comes out on Tuesday, which will provide data on average sale price change for single-family homes across the country.
On Wednesday, the MBA 30-Year Mortgage, and new homes sales data will come out, while on Thursday, GDP growth rate data will be released, indicating how the economy performed in Q4 2024.
The most anticipated report is the personal consumption expenditure index, which comes out on Friday just before markets open. This is the data used by the Fed to determine inflation, and rate cuts. Recent remarks by the Fed chair signal that rate cuts may be delayed until the summer after a full percentage point cut in late 2024.
Another important report to watch out for is Nvidia’s earnings report on Wednesday. The report comes out amid pressure on tech stock as Chinese AI startup DeepSeek appends the markets. Other tech companies are also set to release their reports this week.
Another major development that might move markets this week is Bloomberg’s revelation that Microsoft (MSFT) has cut back on some of its data center leases in the US. The move comes amid the development of the DeepSeek AI model, which consumes considerably less processing power than OpenAI, which is backed by Microsoft.
Despite the cuts, Microsoft issued a statement saying that it still plans to spend up to $80 billion in the current fiscal year on AI data centers.
Could The Stock Market Turn Around This Week?
While a potential deal between Trump and Putin could end the war in Ukraine, it could also signal a renewed focus on China, which could have a much larger impact on stock markets. Despite this, there are still potential trading opportunities in low-risk assets like bonds and gold, which have seen yields rise.
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