Indeed, the S&P 500 managed to notch fresh closing highs on Tuesday and Wednesday, with investors parsing through the remaining company reports as earnings season winds down as well as minutes from the Federal Reserve's last policy meeting. However, the mood soured from Thursday as markets reacted to the latest tariff threats from President Trump. Details were limited but automobiles, pharmaceuticals and wood products could face fresh duties.
For the week the S&P 500 dropped 1.7%, the Dow Jones Industrial Average fell 2.5% and the tech-heavy Nasdaq Composite also lost 2.5%. Another factor weighing on the mood was the worry of the economy weakening. The flash Composite Purchasing Managers’ Index (PMI) dropped to a 17-month low in February, with services activity slipping into contractionary territory. Existing home sales also dropped 4.9% last month. Walmart shares slumped after its fourth quarter earnings report, with the major retailer delivering weaker guidance. This alongside the previous week’s weaker-than-expected retail sales data, raised concerns about the health of the US consumer. US Treasury yields saw moderate declines, following the Fed minutes and also after the PMI data.
European markets managed to eke out slight gains for the week, with investors largely shaking off Trump’s latest tariff threats and hoping for a resolution to the Russia-Ukraine conflict. The pan-European STOXX 600 added 0.3%, having reached another record high during the week. This was the index’s ninth consecutive weekly gain, its longest streak since March 2024. Regional performance was however varied. The Italian index notched a gain, France’s CAC 40 fell 0.3% while the German DAX was down 1% ahead of the election. The UK FTSE 100 fell 0.8%, with the latest inflation and wage data prompting markets to rein in their interest rate cut bets for the year.
Chinese equity markets saw gains for the week, with the Shanghai Composite rising 1% and the Hang Seng jumped 3.8%. Technology stocks helped power gains, continuing their advance on artificial intelligence optimism as well as ecommerce giant Alibaba delivering surprisingly strong results for December. Meanwhile in Japan, stocks lost ground with the Nikkei 225 dropping nearly 1%. Pressure came from a strengthening yen as well as the yield on the 10-year Japanese government bond rising to its highest level since 2009. This was in response to rising inflation in the country.