By Tristan Detzel, CFA, Advisory Portfolios Strategist
Print This Post
Stocks delivered a less-than-award-winning performance last week as concerns over tariffs and mixed economic data stole the spotlight, leading to a late-February pullback. Despite a strong final act on Friday—where the S&P 500 and Nasdaq gained 1.6% each, and the Dow rose 601 points—weekly results were far from Oscar gold. The S&P 500 and Nasdaq fell 0.99% and 3.4%, respectively, while the Dow managed a 0.95% gain. Equity markets briefly faltered after a tense meeting between President Donald Trump and Ukraine President Volodymyr Zelenskyy in the Oval Office, raising concerns over escalating geopolitical risks.
Stocks started the year with mostly positive momentum but reversed course in the last two weeks of February. As the month rolled the credits, the Nasdaq suffered the biggest decline among major U.S. indexes, retreating around 4.0%, while the S&P 500 and the Dow fell 1.4% and 1.6%, respectively.
Earnings season continued its star-studded run, with 64% of the companies reporting last week delivering applause-worthy performances by beating EPS estimates. Of the 53 companies that announced results, 34 beat bottom-line estimates, while 29 topped revenue expectations. The most anticipated premier of the season, Nvidia’s Q4 earnings results, received solid reviews but failed to live up to the hype. The stock stumbled off the red carpet, dropping 8.5% on Thursday before making a slight comeback, gaining 0.6% on Friday.
Yields of U.S. government bonds fell to their lowest levels in nearly three months amid concerns over the latest economic data. The yield of the 10-year U.S. Treasury note closed on Friday around 4.19%, down from 4.42% at the end of the previous week and a recent peak of 4.80% in mid-January.
Recent headlines surrounding DOGE’s efforts to cut costs and improve government efficiency have raised concerns over unintended consequences from thousands of potential layoffs. As layoffs, spending cuts and tariffs have dominated the box office, consumer confidence is falling at its fastest pace since 2021. The Conference Board’s Consumer Confidence Index for February declined for the third consecutive month with a reading of 98.3, down from January’s revised 105 figure and well below expectations. While streamlining federal spending can improve efficiency, abrupt cuts risk slowing economic growth and should be approached with caution.
Friday’s feature presentation, core Personal Consumption Expenditures (PCE) inflation data met consensus expectations, signaling a slowdown compared to the previous year. Core PCE increased 0.3% month-over-month (MoM) and 2.6% year-over-year (YoY) while the headline measure rose 0.3% MoM and 2.5% YoY, both aligning with forecasts.
Garnering more attention on Friday morning was the unexpected plot twist, a sharp decline in personal spending, marking a shift that could signal economic weakness in the first quarter. The reported 0.2% decline marks the steepest drop in nearly four years following an upwardly revised 0.8% increase in December, largely driven by advance purchases ahead of anticipated tariffs. The decline stemmed mainly from lower goods purchases, while spending on services remained positive, rising 0.3%. This surprising consumer data, coupled with a widening trade deficit, is fueling concerns over how the economy will evolve in months ahead.
On the housing front, recent data has indicated an ongoing slowdown in activity as elevated prices and mortgage rates weigh on activity. In January, new home sales declined 10.5% MoM, missing expectations, while pending home sales fell 4.6% MoM, reaching a historical low. Rocket Companies’ CEO Varun Krishna noted that we’re seeing “home equity at an all-time high” and that “January’s jump in listings was the biggest in three years.” However, the housing market remains frozen in a winter slump, unable to greenlight a recovery, with Freddie Mac’s national average for 30-year fixed rate mortgages at 6.76%. For transaction volume to pick up, sellers’ willingness to accept lower offer prices will be tested as buyers are constrained by affordability and higher borrowing costs.
Trump recently announced that tariffs on goods from Canada and Mexico, along with a 10% tariff on Chinese imports, will take effect this Tuesday. As a result, investors are repositioning, shifting away from riskier artificial intelligence technology stocks in favor of defensive sectors such as consumer staples, healthcare and real estate, which offer greater insulation from trade disruptions. Following hints of additional tariffs on cars, semiconductors and pharmaceuticals, auto stocks have suffered—General Motors and Ford are down 7.8% and 3.5%, respectively, this year. Shares of e.l.f. Beauty, which relies heavily on Chinese manufacturing, have taken a horror-movie style plunge, tumbling 44%. Fears of rising prices, slower economic growth and shrinking corporate profits are mounting. As blanket tariffs take effect, investors face an increasingly uncertain path forward.
An explosive Oval Office meeting between President Trump, Vice President JD Vance and Ukraine’s President Zelenskyy had all the elements of a political thriller. Ukraine had sought U.S. backing against Russia, hoping to secure a multi-billion-dollar mineral agreement, but tensions boiled over in front of reporters. Regardless of the fallout, this deal will remain in the spotlight, as it would grant half of Ukraine’s future revenues from oil, natural gas and mining to a U.S.-controlled fund.
Looking ahead to this week, investors will be glued to the screen for January labor market data with the jobs report coming on Friday and ADP Employment report earlier in the week. Additional blockbuster releases include the Institute for Supply Management (ISM) and Purchasing Managers’ Indexes (PMIs) for manufacturing and services as well as factory orders and construction spending. On the earnings front, the season is winding down, but investors will stay for the post-credits scene, with Broadcom and Costco Wholesale still set to report. The upcoming week features the U.S. Federal Reserve (Fed) Beige Book and numerous Fed speakers, and all eyes will be on Fed Chairman Powell’s director’s commentary at the end of the week.
| Time (ET) | Report | Period | Median Forecast | Previous |
| MONDAY, MARCH 3 | ||||
| 9:45 AM | S&P final U.S. manufacturing PMI | Feb. | — | 51.6 |
| 10:00 AM | Construction spending | Jan. | 0.10% | 0.50% |
| 10:00 AM | ISM manufacturing | Feb. | 50.60% | 50.90% |
| TUESDAY, MARCH 4 | ||||
| 2:20 PM | New York Fed President Williams speaks | |||
| WEDNESDAY, MARCH 5 | ||||
| 8:15 AM | ADP employment | Feb. | 143,000 | 183,000 |
| 9:45 AM | S&P final U.S. services PMI | Feb. | — | 49.7 |
| 10:00 AM | Factory orders | Jan. | 1.60% | -0.90% |
| 10:00 AM | ISM services | Feb. | 52.90% | 52.80% |
| 2:00 PM | Fed Beige Book | |||
| THURSDAY, MARCH 6 | ||||
| 8:30 AM | Initial jobless claims | 1-Mar | 243,000 | 242,000 |
| 8:30 AM | U.S. productivity (final) | Q4 | 1.20% | 1.20% |
| 8:30 AM | U.S. trade deficit | Jan. | -$100B | -$98.4B |
| 10:00 AM | Wholesale inventories | Jan. | 0.30% | -0.50% |
| FRIDAY, MARCH 7 | ||||
| 8:30 AM | U.S. jobs report | Feb. | 160,000 | 143,000 |
| 8:30 AM | U.S. unemployment rate | Feb. | 4.10% | 4.00% |
| 8:30 AM | U.S. hourly wages | Feb. | 0.30% | 0.50% |
| 8:30 AM | Hourly wages year over year | 4.10% | 4.10% | |
| 12:30pm | Fed Chairman Jerome Powell speaks | |||
| 3:00 PM | Consumer credit | Jan. | $12.0B | $40.8B |
Links to previously published commentaries can be found at benjaminfedwards.com/Latest Investment Insights/Market Commentary/Market