Will Nvidia decide the near-term direction?

Will Nvidia decide the near-term direction?

DJIA 52-wk: +10.98% YTD: +2.08% Wkly: -2.51%

S&P 500 52-wk: +18.16% YTD: +2.24% Wkly: -1.66%

NASDAQ 52-wk: +22.05% YTD: +1.10% Wkly: -2.51%

SPDR S&P Retail ETF: 52-wk: +0.88% YTD: -5.40% Wkly: -5.13%

The week of February 17 to February 21, 2025, saw significant volatility in the U.S. stock markets, culminating in notable declines across major indices.

On Friday, February 21, the markets experienced sharp downturns:

• S&P 500: Fell 1.7%, closing at 6,013.13.
• Dow Jones Industrial Average: Dropped 1.7%, ending at 43,428.02.
• Nasdaq Composite: Declined 2.2%, finishing at 19,524.01.

Several factors contributed to this downturn:

• Economic Data: The University of Michigan's consumer sentiment index dropped 10% to 64.7, indicating growing consumer pessimism.
• Corporate Earnings: Companies like Walmart provided cautious outlooks, raising concerns about consumer spending amid inflation and tariff issues.
• Policy Uncertainty: Rapid policy changes, including new tariffs and spending cuts, introduced uncertainty, unsettling investors.

In response to these developments, investors shifted towards safer assets, leading to increased demand for the 10-year Treasury note.

Despite the week's challenges, the S&P 500 remains up over 2% for the year 2025.

An unexpected drop in the University of Michigan’s consumer sentiment index slumped to its lowest level in more than a year in February. The index showed consumers were more worried over the path ahead for the economy than economists had expected.

Attention, Walmart Shoppers: You Sank the Stock Market Rally

Things started well enough, with the index grinding higher on Tuesday as the market continued to shrug off tariff worries. Tech names followed their Chinese counterparts higher after China’s President Xi Jinping met with business leaders over the weekend in a show of support for the tech sector. Geopolitical worries put a dent in those gains, but not enough to keep the S&P 500 from reaching a new closing high.

It edged higher again on Wednesday, as investors were largely pleased with the minutes from the latest two-day meeting of the Federal Reserve’s rate-setting committee. Although the central bank said it wants to see “further progress on inflation” before deciding to cut interest rates again, the lack of any surprises was enough to help stocks reach another record.

However, Walmart (WMT -2.50%) spoiled the rally on Thursday. The retail bellwether had a strong holiday quarter but missed lofty expectations for its full-year forecast. The retailer expects sales to grow 3% to 4%, while analysts were looking for the higher end of that range.

Given its size, Walmart has one of the best reads on consumer health. Management reiterated that U.S. shoppers were resilient, but the Street was clearly hoping for more reassurance. Inflation and tariff concerns are fueling uncertainties about consumer spending.

“Inflation and economic uncertainties are expected to impact consumer spending, leading Walmart to adopt a conservative sales outlook for the coming year,” writes Jay Woods, chief global strategist at Freedom Capital Markets.

Things didn’t improve much with Friday’s data. The final reading of the University of Michigan’s consumer sentiment index for February came in at 64.7, below the 67.5 economists had projected. That represents a 10% decrease from January, adding to the gloom. Existing home sales in January also came in lower than expectations.

Still, despite a lackluster end to the week, the S&P 500 remains up over 2% this year. “While 2025 upside is a far cry from back-to-back 20%+ years, it is still nothing to scoff at,” writes Citigroup U.S. Equity Strategist Scott Chronert.

What Top-Performing Healthcare Funds Are Buying Now

Healthcare has been one of the U.S. economy’s most important sectors, yet it has underperformed the S&P 500 for two consecutive years.

“Over the past two years, healthcare has underperformed by the largest amount we’ve seen in more than three decades,” says Andy Acker, manager of the Janus Henderson Global Life Sciences fund.

The Health Care Select Sector SPDR ETF (XLV) gained just 2.1% in 2023 and 2.5% in 2024, while the S&P 500 soared over 20% each year. The ETF’s price-to-earnings ratio is now 18, well below the S&P 500’s 23.

Several funds poised for a comeback include:

• Fidelity Select Pharmaceuticals (FPHAX): 1.9% 1-year return, 9.4% 5-year return.
• Health Care Select Sector SPDR (XLV): 2.1% 1-year return, 8.6% 5-year return.
• Janus Henderson Global Life Sciences (JAGLX): 2.9% 1-year return, 8.2% 5-year return.
• PGIM Jennison Health Sciences (PHLAX): 1.6% 1-year return, 9.9% 5-year return.

Higher borrowing costs have held back biotech, but opportunities remain. Many healthcare stocks remain undervalued compared to broader market trends.

• Tuesday: Consumer Confidence
• Wednesday: NVIDIA earnings
• Thursday: GDP
• Friday: PCE
  

CLOSING REMARKS:

I am staying on the sidelines. If 6,020-6,015 fails on the ES contract, we take another leg down to 5,993 first stop.

Richie

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DATA: Barron’s print edition page 28 2/24/25 Market Week Teresa Rivas

Paragraph: one ChatGPT market recap for the week of 2/17/25-2/21/25 As stated above

Paragraph: two NYT print edition page B2 Stocks & Bonds Joe Rennison

Paragraph: three Barron’s print edition page 24 2/24/25 Lewis Braham

Paragraph: four Paragraph: five Closing remarks Richie Naso opinion