Daily Market Recap – Friday Feb 21, 2025

Stocks Tumble as Growth Concerns Weigh on Sentiment

US equities finished sharply lower on Friday, with the S&P 500 (-1.71%) logging its worst session of 2025 and all major indices ending near their lows. The Nasdaq (-2.20%) and Russell 2000 (-2.94%) underperformed as investors grew increasingly concerned about economic growth following weaker PMI data. Big tech was broadly lower, with Nvidia (NVDA) and Tesla (TSLA) dragging down the sector, while managed care, semiconductors, trucking, and software stocks also saw notable declines. Energy stocks, homebuilders, and industrial metals were among the weakest sectors. On the other hand, pharma, biotech, food & beverage (CELH-US), and tobacco were relative outperformers. Treasuries rallied sharply, with the 10-year yield moving toward 4.40%, while the US dollar (+0.2%) strengthened. Bitcoin (-3.8%) fell sharply, while WTI crude (-2.9%) slid below $71 per barrel after an early bounce.

Macroeconomic Concerns Weigh on Risk Appetite

The market selloff was driven by a combination of weaker-than-expected February PMI data and softer consumer sentiment. The flash US Composite PMI fell to 50.4, marking a 17-month low, as services unexpectedly dipped into contraction territory at 49.7, fueling concerns about a slowing economy. The report also pointed to weaker new order growth and heightened political uncertainty. Meanwhile, January existing home sales fell 4.9%, missing expectations and reinforcing affordability challenges in the housing market. The final University of Michigan Consumer Sentiment index (64.7) softened more than expected, with inflation expectations remaining elevated. These data points added to recent concerns around slowing economic momentum, particularly after last week’s weak retail sales report and downward revisions to Q1 GDP tracking estimates.

Tariff and Policy Uncertainty Add to Market Jitters

Uncertainty surrounding Trump’s economic policies continues to weigh on sentiment, with fresh 25% tariffs proposed on autos, semiconductors, and pharmaceuticals earlier in the week, followed by new levies on lumber and forest products. While some analysts argue tariffs could be used as a negotiating tool for a potential new trade deal with China, concerns persist over their impact on supply chains and inflation. In Washington, budget negotiations remain at an impasse, with government shutdown risks rising ahead of the March 14 deadline. Investors are also watching for signs of potential Federal Reserve policy shifts, as FOMC minutes released earlier this week suggested some officials are considering pausing or slowing balance sheet runoff.

Earnings: Mixed Results and High Expectations Drive Volatility

Earnings remained a key focus, with Walmart (WMT-US) falling after its Q4 beat underwhelmed amid high expectations, and its FY26 guidance came in below consensus. The market reaction reflected concerns over stretched valuations rather than fundamental weakness, as Walmart reiterated its view that US consumer demand remains resilient. On the upside, MercadoLibre (MELI-US) surged on a big EPS beat, driven by strong growth in Brazil (+32% GMV growth) and Argentina. Celsius Holdings (CELH-US) jumped nearly 28% after announcing a $1.8B acquisition of Alani Nu, which is expected to be immediately accretive. Meanwhile, Coinbase (COIN-US) climbed on reports that the SEC may dismiss its enforcement case.

However, several stocks plunged on weak guidance and valuation resets. Hims & Hers Health (HIMS-US) sank -25.8% after the FDA reported that semaglutide (Ozempic/Wegovy) shortages had been resolved, potentially impacting demand for its compounded weight-loss drugs. Akamai Technologies (AKAM-US) fell -21.7% after weak Q1 and FY25 guidance, which highlighted legacy business migrations, FX headwinds, and higher capex. Block (XYZ-US) slid -17.7% on a revenue miss and softer-than-expected gross profit guidance, while Dropbox (DBX-US) dropped -16.2% as management flagged increased churn concerns.

Here’s Our Take

This week’s sharp pullback highlights growing macroeconomic uncertainty, stretched positioning, and softer growth momentum. The recent economic data suggests some cooling in demand, raising concerns that slower growth could begin to pressure corporate earnings expectations. However, Fed policy remains the wildcard - any signs of a shift toward rate cuts or balance sheet adjustments could support risk assets. Tariff risks remain a key overhang, but Trump’s hints at a potential trade deal with China could be an eventual tailwind if negotiations progress.

For investors, the recent selloff may present opportunities in stocks with strong fundamentals and resilient earnings trends — names like Meta (META-US), Amazon (AMZN-US), and Microsoft (MSFT-US) that continue to benefit from secular AI-driven growth. However, the sharp reactions to weaker guidance in some stocks highlight the importance of valuation discipline, particularly in high-expectation growth stocks. Risk management remains critical, as volatility is likely to persist in the coming weeks.