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Market Update: Wall Street Faces Policy Uncertainty Amid Economic Concerns
On Wall Street, market activity has shown resilience as traders attempt to rebound, despite ongoing policy uncertainty stemming from Washington. A notable pullback in stocks occurred around midday, triggered by a heated Oval Office discussion involving President Donald Trump, Vice President JD Vance, and Ukrainian President Volodymyr Zelenskyy. However, the market managed to regain some ground as the day progressed.
A sharp market reaction was also noted following Trump’s announcement of specific timelines for new tariffs. Compounding the market’s challenges, the Atlanta Federal Reserve’s GDPNow tracker provided a discouraging update on U.S. economic performance, projecting a negative growth rate of 1.5% for the first quarter. This estimate marks a significant revision down from the previous outlooks of 2.3% and 2.9% earlier this month, indicating a contraction that has contributed to the volatility observed in recent weeks. Investors are increasingly shifting focus from cyclical stocks to those perceived as having less economic sensitivity.
A positive closing for the S&P 500 would represent its first successful Friday since Trump’s inauguration, as worries over potential policy announcements loom large over investors. As February draws to a close, the index is set to reflect a 3% decline for the month, as of the latest closing figures.
February Sector Performance: Winners and Losers
Looking at sector performance throughout February, the consumer staples sector emerged as a key winner, posting gains exceeding 4%. Within this sector, Costco was highlighted for its strong performance, nearly matching the overall sector growth with a close to 5% increase. Real estate also fared well, benefiting from favorable movements in interest rates, particularly as the 10-year Treasury yield fell.
Energy was another sector that saw monthly gains, although Coterra Energy, a Club name, underperformed within this group alongside other natural gas-focused companies. Sectors such as utilities, healthcare, financials, and materials demonstrated better resilience than the S&P 500 overall but still posted declines for the month.
Noteworthy stocks that excelled included Eli Lilly and Abbott Laboratories in healthcare, both of which have solidified their status as growth leaders. DuPont and Linde also rose above the broader materials sector, driven by positive operational performance and strategic focus as DuPont approaches its upcoming spinoff of its electronics business later this year. Linde’s ability to sustain earnings growth in a slowing economy has made it a standout as well.
Conversely, Danaher in healthcare and BlackRock in financials represented the most disappointing performances. Danaher struggled to rebound from a downcast outlook issued at the end of January, while BlackRock experienced declines following fee reductions initiated by a competitor.
Consumer Discretionary Sector Struggles
The consumer discretionary sector faced considerable challenges, suffering a nearly 11% decline over the month. Factors contributing to this downturn included weak retail sales and consumer sentiment indicators, suggesting a potential slowdown in spending. Among the worst hit was Tesla, while Amazon also faced difficulties, albeit with a few bright spots like Starbucks, where profits were realized on a recent sale.
Communications and Technology Under Pressure
Communications services followed closely as the second worst-performing sector, with Alphabet witnessing significant declines amid intensified selloffs in major tech stocks, notably the so-called “Magnificent Seven.” While Alphabet delivered disappointing fourth-quarter earnings, Meta Platforms was unable to benefit from its earlier gains, closing lower despite posting no negative sessions during the month’s initial weeks.
Information technology and industrial sectors similarly faced a tough month. Companies like Nvidia and Broadcom within tech, as well as industrial firms such as Eaton, are still grappling with the aftereffects of a market selloff earlier this year.
What’s Ahead: Upcoming Earnings and Economic Reports
Looking ahead to the upcoming week, the earnings calendar appears relatively light, yet a few significant companies are scheduled to release their results. In the portfolio, CrowdStrike will report after Tuesday’s market close, while both Broadcom and Costco are set for Thursday evening announcements. Additional noteworthy reports will come from Target, former Club holding Best Buy, and Bullpen name Marvell Technology.
A plethora of economic data is anticipated as well; the highlight being the monthly nonfarm payrolls report slated for release on Friday. Prior to that, markets will contend with reports on ISM manufacturing, factory orders, and ISM services, all of which could impact ongoing discussions around the economic outlook.
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