The S&P 500 declined 0.5% on Monday, closing at 5,983.25. The Nasdaq Composite fell 1.21%, ending the session at 19,286.92. The Dow Jones Industrial Average eked out a narrow gain of 33.19 points, or 0.08%, to close at 43,461.21.
Shares of major tech companies came under pressure, leading the Nasdaq lower and into negative territory for the year. Alphabet tumbled 10.5%, significantly impacting the tech-heavy index. Microsoft shed about 1% after an analyst report suggested the company is cutting spending on data centers, raising fears of weakness in the artificial intelligence trade.
Nvidia also pulled back 3%. Concerns over President Donald Trump’s trade policies continued to weigh on market sentiment. Trump mentioned that tariffs on Canada and Mexico would take effect after the monthlong postponement deadline ends next week.
“The White House had investor support for the first four weeks of the term, but the honeymoon may be coming to an end,” said Scott Helfstein, head of investment strategy at Global X. The decline followed the stock market’s fall last week. The Dow and Nasdaq finished the week more than 2% lower, while the S&P 500 shed more than 1%.
On Friday alone, the Dow pulled back more than 700 points, while the S&P 500 and Nasdaq dropped 1.7% and 2.2%, respectively. These declines came after February data raised concerns over the state of the U.S. economy. Purchasing managers’ index numbers showed the U.S. services sector contracted for the month, while the University of Michigan’s consumer sentiment index came in weaker than expected.
The week ahead includes key readings on corporate earnings and the economy.
Market volatility linked to trade tensions
Earnings reports from Home Depot and Lowe’s on Tuesday and Wednesday, respectively, will give investors a better sense of how U.S. consumers are faring.
Nvidia’s earnings report on Wednesday evening is also highly anticipated, given the company’s significant market cap and influence. Additionally, the January reading of the personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, is scheduled for release on Friday. “Friday’s PCE for January will be extra important for markets, as it will help confirm if inflation did indeed spike at the start of 2025, given the strong January readings for CPI and PPI,” said Clark Bellin, president and chief investment officer at Bellwether Wealth.
“However, regardless of Friday’s PCE findings, it is likely that the Federal Reserve will remain on hold regarding interest rate decisions for at least the next six months,” Bellin added. Defense stocks continued to fall, with the Aerospace and Defense ETF inching down 0.3% on Monday. Month-to-date, the fund has declined around 7.7%.
President Donald Trump’s calls for Department of Defense budget cuts have pressured defense companies. Year-to-date, the defense ETF is down more than 2%. Tech investors are also on alert as U.S. PC makers are expected to raise prices in response to the proposed U.S. tariffs on Chinese goods.
“If tariffs of 10–25% are imposed, PC makers like Dell, HP, and Apple will likely pass the added costs onto buyers, raising prices by at least 10% in the US,” Bank of America analyst Wamsi Mohan noted. The price increases may offset margin pressure but could impact demand, particularly among price-sensitive customers. Despite tariff concerns, UBS remains optimistic.
“We anticipate further volatility amid tariff concerns, but we continue to expect gains for the market and see the index reaching 6,600 by year-end,” wrote UBS strategists in a Monday note. The firm’s year-end target implies 9.8% upside by the end of the year, supported by a solid U.S. economy, healthy corporate earnings growth, and advancements in AI. Overall, investors are advised to remain cautious but look for opportunities amid market volatility.
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