The S&P 500 experienced a modest increase of around 0.2% on Monday as the market attempted to recover from a significant sell-off on Friday. The Dow Jones Industrial Average also saw an uptick, rising by 197 points, or 0.5%. Conversely, the Nasdaq Composite faced downward pressure, declining by 0.3%, driven primarily by weak performances in major tech stocks.
Among the notable declines, Palantir’s shares plummeted over 8%, contributing to the Nasdaq’s drop, while Microsoft’s stock decreased by about 1%. Analysts from TD Cowen highlighted concerns regarding Microsoft’s cut in spending on data centers, which heightened fears regarding the potential weakness in the competitive artificial intelligence sector.
This market movement follows a detrimental week where both the Dow and Nasdaq fell more than 2%, and the S&P 500 saw a decrease of over 1%. Friday alone witnessed the Dow’s significant drop of over 700 points, with the S&P 500 and Nasdaq losing 1.7% and 2.2% respectively. Such declines were prompted by disconcerting indicators from February that suggested contractions in the U.S. services sector and disappointing results from the University of Michigan’s consumer sentiment index.
Looking ahead, critical corporate earnings releases this week, including those from Home Depot and Lowe’s, are anticipated to provide insights into consumer health. Additionally, Nvidia’s earnings report on Wednesday is expected to hold substantial weight, given its prominence in the AI industry.
On Friday, the focus will shift to the personal consumption expenditures (PCE) index for January, a key measure of inflation preferred by the Federal Reserve. Analysts like Clark Bellin from Bellwether Wealth emphasized the importance of this reading in determining whether inflation surged at the beginning of 2025, especially in light of strong January figures from other inflation measurements, such as CPI and PPI. Despite the outcomes, many believe the Federal Reserve is likely to maintain its current interest rate strategy for at least the next six months.
This environment poses both challenges and opportunities for investors, as they navigate uncertain economic data while seeking growth potential amidst the evolving landscape of tech and consumer spending.