Dow has biggest drop of 2025 so far

The stock market took a significant hit on Friday as fresh U.S. economic data fueled investor fears over slowing growth and persistent inflation. Traders rushed to safer assets, triggering widespread losses across major indexes.

Dow, S&P 500, and Nasdaq see sharp declines

The Dow Jones Industrial Average plunged 748.63 points (1.69%), closing at 43,428.02—its worst single-day drop this year. This extended its two-day decline to approximately 1,200 points. Meanwhile, the S&P 500 fell 1.71% to 6,013.13, and the Nasdaq Composite slid 2.2%, settling at 19,524.01.

Economic concerns drive investor caution

Multiple data points rattled the markets:

  • Consumer sentiment drops: The University of Michigan consumer sentiment index fell to 64.7 in February, nearly a 10% decline—worse than expected. Consumers cited concerns over inflation, particularly from potential new tariffs.
  • Inflation expectations rise: The survey’s five-year inflation outlook climbed to 3.5%, the highest level since 1995.
  • Housing market slowdown: Existing home sales in the U.S. declined more than forecasted, dropping to 4.08 million units.
  • Services sector contracts: The U.S. services purchasing managers’ index (PMI) moved into contraction territory for February, according to S&P Global.

Retail and tech stocks struggle

Retail giant Walmart suffered a 2.5% decline, marking its second consecutive day of losses after issuing a weaker-than-expected forecast. This fueled concerns about consumer spending and overall economic health.

Investor sentiment was further dampened by billionaire investor Steve Cohen, who, during a Miami conference, warned that the best gains may already be behind us. He suggested that a major correction could be on the horizon due to tariff proposals and government cost-cutting measures.

Tech stocks also felt the pain:

  • Nvidia and Palantir suffered sharp losses as investors shifted toward defensive assets.
  • Defensive stocks like Procter & Gamble (+1.8%), General Mills, and Kraft Heinz (each up more than 3%) gained as money flowed into traditionally stable sectors.

Federal Reserve rate cut expectations shift

Market expectations for Federal Reserve rate cuts increased significantly:

  • 55% chance of two to three cuts by December 2025, bringing rates from 4.25%-4.50% down to 3.50%-3.75%.
  • 50% probability of a rate cut by October, up from 38% just a day earlier.

Materials sector slides, losing 10% from recent highs

The S&P 500 materials sector fell 1.8% on Friday, pushing it 10% below its peak from last October. Despite entering the week as 2025’s best-performing sector (up 4% YTD), stocks in this group struggled:

  • Freeport-McMoRan and Newmont Corporation both dropped 5%.
  • Some steel stocks, however, may benefit from the protectionist trade policies introduced by the Trump administration.

Consumer sector worst week since 2023

The consumer discretionary sector was hit hard, recording a 4.7% weekly loss, its worst since September 2023. Key contributors to the downturn included:

  • Carnival and Royal Caribbean, both plunging over 11%.
  • Caesars Entertainment (-11%) and Chipotle (-10%) also suffered steep declines.

With this week’s losses, the consumer discretionary sector is now down nearly 4% in 2025.

Investors turn defensive as uncertainty looms

As economic uncertainty grows, investors are shifting focus to defensive sectors like consumer staples, utilities, and healthcare. Market strategist Larry Tentarelli notes that these areas tend to outperform when economic growth concerns arise.

Stay ahead of market trends

With market volatility on the rise, staying informed is crucial. Keep an eye on upcoming economic reports, Federal Reserve announcements, and corporate earnings for further signals on market direction.

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