Daily Market Recap – Tuesday Feb 25, 2025
US Equities Mostly Lower Amid Growth Concerns and AI Scrutiny
US equities were mostly lower on Tuesday, with the S&P 500 (-0.47%) and Nasdaq (-1.35%) leading the decline, while the Dow (+0.37%) eked out a gain. The Russell 2000 (-0.38%) also closed lower. Stocks bounced off worst levels, but concerns around growth, AI sector scrutiny, and soft consumer confidence data weighed on sentiment.
Big tech was mostly lower again, with Tesla (TSLA) and Meta (META) notable laggards, with the latter now down for six straight sessions. Semiconductors, software, energy, money center banks, investment banks, credit cards, online brokers, asset managers, airlines, trucking, travel, and entertainment stocks were also weak.
Relative outperformers included homebuilders, housing-related retail, discounters, China tech, managed care, pharmaceuticals, chemicals, property & casualty insurers, household products, and food & beverage names like Keurig Dr Pepper (KDP).
Treasuries saw strong gains with a bit of curve flattening, as the 10-year yield fell below 4.30%, down 26 basis points over the past five sessions. The dollar index fell 0.3%, while gold declined 1.5% and Bitcoin futures tumbled 6.2%. WTI crude settled down 2.5%, falling below $70/barrel for the first time since late December.
Weak Consumer Confidence Data and Policy Uncertainty Weigh on Markets
Markets faced continued pressure as February’s consumer confidence index dropped sharply to 98.3, marking the sharpest monthly decline since August 2021. The labor market differential narrowed, with more respondents saying jobs are harder to get. This followed last week’s weak University of Michigan consumer sentiment report, which hit its lowest reading since November 2023.
Other economic data was mixed:
Richmond Fed Manufacturing Index rebounded into expansion territory.
Case-Shiller 20-City Home Price Index and FHFA Home Price Index both came in ahead of expectations.
A well-received $70 billion 5-year Treasury auction followed Monday’s $69 billion 2-year auction, signaling solid demand for bonds.
Meanwhile, Federal Reserve speakers struck a cautious tone on rate cuts. Fed Governor Barr highlighted financial stability concerns, while Richmond Fed’s Barkin said uncertainty justifies a cautious approach. However, he expects upcoming PCE inflation data to show continued progress.
In Washington, focus remains on House Republicans’ reconciliation plan, though passage remains uncertain due to internal party divisions over Medicaid cuts and spending plans. The March 14 government funding deadline looms as another key overhang.
Stock Highlights: Nvidia, Tesla, Home Depot, and More
Nvidia (NVDA) reportedly saw a jump in H20 chip orders from Chinese firms ahead of its highly anticipated earnings report on Wednesday.
Tesla (TSLA) European sales dropped 45% YoY in January, with German registrations plunging nearly 60%.
Home Depot (HD) posted positive Q4 comps for the first time in two years, though its FY25 guidance was on the light side.
Keurig Dr Pepper (KDP) cleared a low expectations bar, posting a revenue and earnings beat.
Zoom (ZM) gave a mixed outlook, with analysts focused on sluggish top-line growth despite AI investments.
On the M&A front, Bridge Investment Group (BRDG) surged 33.8% after announcing a $1.5 billion all-stock acquisition by Apollo Global Management (APO). Meanwhile, speculation over a potential $10 billion Walgreens Boots Alliance (WBA) buyout by Sycamore Partners boosted WBA shares 6.5%.
Here’s Our Take
Markets remain under pressure from soft consumer confidence data, AI sector scrutiny, and policy uncertainty in Washington. The yield curve’s recent rally suggests growing concerns over economic growth, though rate-cut expectations continue to shift.
Big tech remains under pressure, with Nvidia (NVDA) expected to report earnings on Wednesday, a key event for AI sentiment. Tesla’s (TSLA) European weakness and Google’s (GOOGL) AIO search impacts on Chegg (CHGG)underscore shifting industry risks.
With the March 14 government funding deadline looming, geopolitical tensions, tariff threats, and slowing consumer sentiment remain key market overhangs. While growth concerns are rising, investors should watch upcoming PCE inflation data and Nvidia’s earnings as key inflection points for market direction.