Daily Market Recap – Thursday Feb 20, 2025
Stocks Slide as Retail Earnings and Trade Developments Weigh on Sentiment
US equities closed lower on Thursday, with the Dow (-1.01%), S&P 500 (-0.43%), Nasdaq (-0.47%), and Russell 2000 (-0.91%) all declining. While stocks ended off their worst levels, major indices are now mostly lower for the week, with the S&P 500 hovering near flat after hitting a record close on Wednesday. Weakness in consumer staples retailers (Walmart), banks, EVs, airlines, trucking, chemicals, and cybersecurity stocks weighed on the market. Big tech was mixed, while energy, biotech, homebuilders, and tobacco stocks managed to outperform. Treasury yields mostly fell, leading to some curve flattening, while the dollar index was down 0.8%. Gold rose 0.7%, Bitcoin futures climbed 2.7%, and WTI crude added 0.5%.
Walmart Drags Retail as Tariff Uncertainty Persists
The most significant market mover was Walmart (WMT), which reported an underwhelming Q4 beat and a softer-than-expected FY26 outlook, leading to a selloff in retail stocks. Analysts attributed the weakness more to elevated expectations and crowded positioning rather than a deterioration in consumer spending trends. On the trade front, Trump expanded tariffs to include lumber and forest products, though he also hinted at the potential for a new US-China trade deal. The lack of details and delayed implementation of auto, semiconductor, and pharmaceutical tariffsis providing some cushion for markets, but uncertainty remains high. Meanwhile, tensions between Trump and Zelensky continue, with a planned joint press conference being canceled despite US-Ukraine discussions continuing behind the scenes.
Economic Data: Jobless Claims Rise, Philly Fed Index Declines
Initial jobless claims came in at 219K, slightly above consensus estimates of 216K, while continuing claims were slightly below expectations at 1.869M. The Philadelphia Fed Manufacturing Index dropped to 18.1, down from 44.3 in January, with notable declines in new orders and shipments. However, the survey’s prices paid index surged to its highest level since October 2022, raising inflation concerns. Investors are now looking ahead to Friday’s flash PMIs, University of Michigan consumer sentiment, and January existing home sales for further macro signals.
Fedspeak: No Rush to Cut Rates, Watching Inflation Closely
A flurry of Fed commentary reaffirmed the cautious stance on rate cuts, with officials emphasizing that the central bank remains data-dependent. Atlanta Fed President Bostic said it may take several months to determine whether January’s hot inflation print was an outlier or a shift in trend. Chicago Fed’s Goolsbee suggested upcoming PCE inflation data may be less alarming than CPI, while St. Louis Fed’s Musalem warned of inflation expectations potentially becoming unanchored. The FOMC minutes from January reiterated that officials are considering slowing or pausing the Fed’s balance sheet runoff, which has provided some support for Treasuries.
Earnings Highlights: Walmart Misses, Alibaba and Shake Shack Impress
Walmart (WMT -6.5%): Q4 comps, revenue, and EPS were slightly ahead, but FY26 guidance fell short, leading to a selloff. Elevated expectations and high positioning contributed to the stock’s decline.
Alibaba (BABA +8.1%): Q3 revenue and profits exceeded estimates, with its cloud segment growing 13% YoY, fueled by strong AI-related demand.
Shake Shack (SHAK +11.1%): Q4 margins improved, and revenue guidance for Q1 and FY25 came in ahead of expectations.
Carvana (CVNA -12.1%): Q4 earnings and revenue beat, but guidance lacked clarity on retail unit and EBITDA growth.
Trupanion (TRUP -25.5%): Weak subscriber growth led to a sharp selloff despite improving monthly revenue per pet.
Investment Takeaways
Retail Weakness and Tariff Uncertainty: Walmart’s soft guidance and crowded positioning triggered a selloff in consumer staples, but overall consumer demand remains resilient. Trade policy uncertainty continues to be a risk, though delays in implementation provide room for negotiations.
Inflation and Fed Policy: Rising prices paid in the Philadelphia Fed survey signal ongoing inflation risks, but the Fed remains patient on rate cuts, with PCE data on the radar as a key indicator for future policy moves.
AI and Cloud Growth Remain Bright Spots: Alibaba’s cloud growth and AI tailwinds continue to drive tech optimism, reinforcing AI’s expanding role in enterprise computing and digital transformation.
Stock Positioning Matters: Some of the biggest post-earnings decliners (Walmart, Carvana, Trupanion) were not necessarily due to weak results, but rather high expectations and positioning risk. Investors should remain mindful of sentiment and valuation when trading around earnings.
Markets now turn to Friday’s economic data releases, which will offer further clues on inflation trends, consumer confidence, and the Fed’s policy path.