“We don’t think investors should be overreacting to one data point,” said one market strategist as the Dow fell 700 points.
The Blue Chip Dow Jones Industrial Average suffered the worst day of the year to date, plummeting more than 700 points as investors fear the health of the US economy.
When the bell closed on February 21, the Dow Jones raised 748.63 points (1.69%) to 43,428.02. The index recorded a 2.5% decrease per week, but an annual increase of 2%.
The Tech Heavy Nasdaq Composite Index fell to 19,524.01 by 438.36 points (2.2%). It also recorded a weekly loss of 2.5%, an increase of 1.1% so far in 2025.
The S&P 500 fell 104.39 points (1.71%) to 6,013.13. The index fell 1.66% this week, but it kept its profits in 2025, up 2.2%. The S&P 500 was off the new record high early in trading week.
Traders have revolved around the defence sector, including consumer staples, healthcare and utilities. This is a common trading tactic when economic growth concerns arise.
What happened on Wall Street?
A blend of expired options and poor economic data has driven sharp selling.
Approximately $2.7 trillion options related to the Stock and Exchange Trade Fund (ETF) were ready to expire at the end of trading week. In other words, these contracts are no longer valid. Expiration dates usually cause major price fluctuations.
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The lack of data also led to concerns about the broader health of the national economy.
Chris Williamson, chief business economist at S&P Global Market Intelligence, says the worse-than-expected figure was driven by the new administration’s policies and uncertainty over cold winter weather.
“Driving into anecdote reports from companies in the PMI Survey Survey, US service companies are looking at the uncertainty and instability surrounding new US government policies, including reducing federal spending and tariff-related developments. , widely criticised lower sales and activity levels,” Williamson said.
“We hope that unfavourable (cold) weather will also contribute in some cases like January, and at least prove that at least some of the weaknesses these days are temporary.”
US manufacturing was stable as S&P Global PMI remained in expansion mode for the second consecutive month, rising to its highest level since June 2024. It also surpassed market estimates amidst increased factory output and employment profits.
Furthermore, inflation expectations rose by 4.3% in the year, which reached 4.3%, from 3.3% in January. The five-year outlook has skyrocketed to 3.5%, the highest since 1995.
The terrible measurements were driven by “the fear of imminent rise in prices due to tariffs.”
“Personal finances and short-term economic outlook expectations fell by nearly 10% in February, while the long-term economic outlook fell by about 6%, the lowest reading since November 2023. ”, HSU said in the report.
President Donald Trump received an executive order on February 13, 2025 in his oval office. Kevin Lamarck/Reuters
In the first month of the new administration, President Donald Trump proposed mutual tariffs, 25% of steel and aluminum imports to all trading partners, and 25% of import duties on Canadian and Mexican goods that enter the United States. did.
The widespread sale sent investors to US Treasury securities as yields went red all over the board. The benchmark 10-year yield reduced its 6.8 basis points to 4.431%. Over the two years, 6.6 basis points fell to 4.2%, and 30-year bonds went from 5.8 basis points to 4.68%.
It’s not time to panic, experts say
Investors should refrain from panic, according to Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report.
“The expiration date of options could be added to some of the volatility from weaker economic data, but we’re trying not to read too much of a single data point into one set,” Tentarelli told Epoch Times I mentioned it in a memo sent by email.
“I don’t think investors need to overreact to one data point, especially I don’t think this week’s S&P 500 will only come out of new highs. Rather than predicting economic data points If you look at the soft series, it raises more red flags.”
Gina Bolvin, president of Bolvin Wealth Management Group, believes the foundations are solid enough to keep the bull market wild.
“We still have a strong foundation for the bull market to continue. Revenue growth is up 15% and the Fed may be suspended, but the next move will be reduced,” Volvin said. It stated in a memo sent by email to the Epoch Times.
The Federal Reserve has suspended rate-cutting cycles and indicates that policy measures will not be taken until further advances inflation. Additionally, financial authorities are beginning to investigate the impact of changes on Trump’s trade and immigration policies.
Ultimately, “creepy” consumers could be good news for the US, as they could help reduce inflation in the coming months, Volvin added. Annual inflation rate rose for the fourth consecutive month in January, reaching 3% for the first time since June.
Walmart stocks were roughly 6% during the trading session on February 20, with large retailers forecasting sales and profits for this fiscal year.
CFO John David Rainey suggested in a post-revenue call that consumer spending could be slower, but shoppers say they are “resilient” and focus on value I proposed that.
“Our outlook assumes a relatively stable macroeconomic environment, but acknowledges that there is still uncertainty related to consumer behavior and global economic and geopolitical conditions. “Rainie said.
Despite potential headwinds from Trump’s tariffs, Jan Hatzius, chief economist and head of Goldman Sachs Research, believes the world’s biggest economy’s growth outlook is still on track It’s there.
The economy has seen changes in the earthquake, but the outlook for financial institutions from November 2024 has not changed much, Hatzius pointed out.
