Weekly Market Recap: Tech Slump, Economic Uncertainty, and the Fed’s Next Move
Market Overview
U.S. equities ended the week mixed as market volatility persisted. The S&P 500 and Nasdaq posted weekly losses of -0.95% and -3.45%, respectively, while the Dow Jones Industrial Average (DJIA) gained 1.01%. The Russell 2000 dropped -1.44%, with small caps continuing to struggle.
A key market event was NVIDIA’s (NVDA) earnings report, which, despite beating estimates, failed to impress investors expecting stronger upside, weighing on the AI sector. Meanwhile, economic uncertainty grew after President Trump confirmed new tariff plans on Canada, Mexico, and China, pressuring market sentiment. Despite weak consumer confidence data, positive GDP growth and inflation figures supported rate cut expectations, helping to lift stocks slightly into the weekend.
International markets saw mixed performance. European stocks rose on post-election optimism in Germany, while Asian markets declined due to renewed U.S.-China trade tensions and tech stock pullbacks in Hong Kong and Japan.
Federal Reserve Insights and Economic Roundup
The Core PCE deflator, the Fed’s preferred inflation gauge, decelerated to 2.6% in January, down from 2.9% in December, reflecting softer consumer spending and slower wage growth. However, monthly inflation remains slightly above the Fed’s target. Consumer confidence fell sharply to its lowest level since June, signaling growing economic uncertainty.
Treasury yields declined, with the 10-year Treasury yield falling 12 basis points and the 2-year Treasury yield down 16 basis points, reflecting increased expectations for rate cuts. However, the Fed remains cautious, with markets now pricing in two rate cuts in 2025.
In bond markets, U.S. Treasury auctions saw strong demand, particularly among international buyers, indicating continued appetite for safe-haven assets.
Commodities fell sharply, with West Texas Intermediate (WTI) crude oil dropping due to U.S. dollar strength and easing geopolitical tensions, while gold had its worst week in three months amid economic data that reinforced expectations of a gradual Fed approach.
The Week Ahead
Investors will focus on key labor market data, inflation readings, and Federal Reserve updates:
- Monday: ISM Manufacturing Index (Feb), Construction Spending (Jan)
- Wednesday: ADP Employment Change (Feb), ISM Services Index (Feb), Fed’s Beige Book
- Thursday: Initial Jobless Claims, Trade Balance (Jan), Productivity Data
- Friday: February Nonfarm Payrolls, Unemployment Rate, Wage Growth
Market participants will be looking for further signals on inflation and labor market conditions, which could shape the Fed’s policy outlook in the coming months.