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Stocks are trying to hold their ground amid a flood of bearish headlines and negative sentiment.
For the second week in a row, the S&P 500 fell sharply on Monday before rebounding into Friday. The index held potentially important levels both times. (See “Charting the Market” below.)
The recent drop came after President Trump imposed tariffs on Mexico and Canada, the biggest trade partners of the United States. He quickly delayed their implementation after Mexico agreed to border-security demands. The index rose for the next three sessions but dropped on Friday after the White House announced it will impose reciprocal tariffs on more countries this week.
While Trump didn’t identify the foreign states, the action may be intended to pressure Europe and Japan to lower trade barriers on U.S. products. The moves could suggest he is using tariffs as leverage to boost exports and not aiming to disrupt trade significantly.
The combination of events has weighed on sentiment. First, the American Association of Individual Investors reported the highest “bearish” reading in its weekly poll (43 percent) since late 2023. The University of Michigan’s consumer sentiment index fell more than expected the next day as Americans braced for higher prices.
Last week’s economic data was mostly strong. The Institute for Supply Management’s manufacturing index rose more than forecast to a 27-month high. New orders continued a string of improvement, while production and employment trends turned positive.
Job growth for December missed estimates by a narrow margin. However, the unemployment rate unexpectedly fell back to 4 percent for the first time since May. Wage growth beat estimates and payroll gains in the two previous months were revised sharply higher.
| Palantir Technology (PLTR) | +34% |
| Super Micro Computer (SMCI) | +27% |
| Expedia (EXPE) | +18% |
| Monolithic Power (MPWR) | +13% |
| Take-Two Interactive Software (TTWO) | +13% |
| Source: TradeStation Data |
Other numbers were less positive but didn’t have much impact. Initial jobless claims were above consensus and service-sector data unexpectedly slowed.
The lack of dramatic economic news kept bond yields and currencies little changed following sharp rises in the fourth quarter. That lifted assets like precious metals and foreign equities. Traders may continue to monitor the “weak dollar” theme this week — especially with two big events looming:
Traders are likely to watch those headlines for their impact on inflation and interest rates. Dovish comments from Powell or mild CPI could lower borrowing costs and the greenback, potentially boosting stocks and metals. Hawkish comments or higher inflation could have the opposite effect.
Real estate investment trusts were the top-performing sector in S&P 500 last week. That’s also consistent with expectations of lower rates.
“Real estate is on a road to recovery,” Kathleen McCarthy, co-head of real estate at Blackstone (BX), told CNBC on Thursday. The combination of lower borrowing costs, reduced supply and demand “really paves the way for cash-flow growth,” she added. BX is the largest single real-estate investor in the world.
| FMC (FMC) | -38% |
| Skyworks Solutions (SWKS) | -26% |
| Estee Lauder (EL) | -22% |
| Moderna (MRNA) | -17% |
| Huntington Ingalls Industries (HII) | -15% |
| Source: TradeStation Data |
Technology and software also rose, supported by strong results at Palantir Technologies (PLTR). The data-science company beat forecasts by continuing to add corporate customers. (PLTR’s original market focused on national security.)
Expedia (EXPE) had its best week in over a year after earnings, revenue and bookings surpassed estimates. The travel stock also reinstated its quarterly dividend, halted by the pandemic nearly five years ago. Monolithic Power (MPWR), Take-Two Interactive (TTWO) and Pinterest (PINS) rallied on strong results as well.
Uber Technologies (UBER) didn’t make the top five in the S&P 500, but it still jumped 12 percent after Bill Ackman took a position in the ride-sharing firm.
Tesla (TSLA), on the other hand, had its biggest weekly drop since October. Reports of increased competition in China weighed on the EV maker. Combined with soft guidance from Amazon.com (AMZN), that made consumer discretionaries the worst-performing sector last week.
FMC (FMC) fell the most overall and recorded its biggest weekly drop in at least 57 years. The chemical maker’s revenue and guidance missed estimates, triggering downgrades from Bank of America, UBS and RBC Capital.
Skyworks Solutions (SWKS) fell the most since 2008 after revealing Apple (AAPL) planned to use fewer of its chip in the iPhone 17.
Interestingly, FactSet reported that quarterly profits for S&P 500 companies are up 16.4 percent so far this reporting season. It’s on pace to be the highest growth since late 2021 and is exceeding the 11.8 percent increase expected in late 2024. (However, estimates for the current quarter have dropped by about 3 percentage points.)
S&P 500, daily chart, with select patterns and indicators.
All told, the S&P 500 slid 0.2 percent between Friday, January 31, and Friday February 7. It was the smallest weekly move since the beginning of October, according to TradeStation data.
Price action was oddly similar to the previous week: Sellers hammered the index early, but prices closed above the previous Monday’s low of 5,963. The index also bounced at a falling trendline, which could mean old resistance became new support.
The rebound followed a mid-January bounce near the Election Day close of 5,783.
Next, Friday’s close of 6,026 was slightly above weekly highs on January 6 and January 17.
The result could be that support is being established at successively higher levels within a consolidation zone. Wilder’s Relative Strength Index (RSI) is also neutral. Those conditions may lay the groundwork for a potential breakout if news events like tariffs and CPI resolve positively.
Prices have additionally stayed above the 50-day moving average, which may confirm the index remains in an intermediate-term uptrend.
No big economic reports are scheduled for today. The main scheduled events are earnings from McDonald’s (MCD) and Vertex Pharmaceuticals (VRTX).
Fed Chair Powell begins his testimony at 10 a.m. ET tomorrow. Super Micro Computer (SMCI), Shopify (SHOP), Coca-Cola (KO) and DoorDash (DASH) are some noteworthy companies issuing results.
Wednesday brings the inflation report at 8:30 a.m. ET, crude oil inventories and more comments by Powell. Reddit (RDDT), Robinhood Markets (HOOD), Cisco Systems (CSCO) and CVS Health (CVS) are some big names reporting.
Thursday features the producer price inflation report and initial jobless claims. Palo Alto Networks (PANW), Coinbase Global (COIN), Applied Materials (AMAT), DraftKings (DKNG) and Roku (ROKU) report earnings.
Retail sales are on Friday morning, along with Moderna’s (MRNA) quarterly numbers.
Markets are closed on Monday, February 17 for Presidents’ Day.
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