In a challenging trading session on Friday, benchmark equity indexes in the United States experienced noticeable retreats as traders processed recent economic data. This included a survey that revealed a significant drop in consumer sentiment coupled with a surprising increase in inflation expectations.
The Nasdaq Composite fell by 2.2%, reaching a level of 19,524, while both the S&P 500 and the Dow Jones Industrial Average saw declines of 1.7%, ending at 6,013.1 and 43,428, respectively. The sectors hit hardest included consumer discretionary and technology, showcasing steep declines, whereas the utilities sector remained relatively stable.
Interestingly, consumer staples emerged as the only sector to post gains amidst the overall downturn. Looking at performance for the week, both the Dow and Nasdaq registered a decline of 2.5%, while the S&P 500 faced a loss of 1.7%. From an economic perspective, February brought a sharp drop in US consumer sentiment when compared to previous months, with survey results indicating that inflation expectations for the year ahead reached their highest levels since November 2023, according to research conducted by the University of Michigan.
Surveys of Consumers Director Joanne Hsu articulated the concerns current in the market, suggesting that "fears that tariff-induced price increases are imminent" are contributing significantly to this sentiment. In reports focusing on production, output growth in the US private sector showed an unexpected dip in February, coinciding with a waning sense of optimism as anxiety about potential tariff impacts and domestic spending cuts began to surface, according to a report published by S&P Global.
The landscape of the housing market was similarly affected, with existing home sales in the US dropping more than analysts had projected for January amidst persistently high mortgage rates and elevated house prices. National Association of Realtors Chief Economist Lawrence Yun commented on the situation, stating, "Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve.
When combined with elevated home prices, housing affordability remains a major challenge." In the bond market, the 10-year US Treasury yield saw a decrease of 6.6 basis points, ending at 4.43%, while the two-year rate similarly lost 6.4 basis points to settle at 4.20% amid shifting investor sentiments.
Shifting gears to company-specific news, Akamai Technologies experienced a significant downturn with its shares plummeting nearly 22%, marking the steepest decline within the S&P 500 index. This downturn stemmed from a disappointing release of quarterly results and subdued full-year financial expectations shared late Thursday.
In contrast, UnitedHealth Group issued a rebuttal on Friday against claims made by The Wall Street Journal that suggested the US Department of Justice had initiated an investigation concerning the health insurer's Medicare billing practices. Consequently, shares of the company fell by 7.2%, making it the worst performer on the Dow.
On a more positive note, MercadoLibre stood out on the Nasdaq, observing an increase of 7.1% following a quarterly report that surpassed expectations. Further influencing the market, West Texas Intermediate crude oil prices settled at $70.23 per barrel after a decline of 3.1%, pointing towards a weekly loss in oil prices.
Market analysts from Saxo Bank indicated that investors are grappling with "an increasingly erratic message flow from Washington, DC," while keeping an eye on decisions regarding output from the Organization of the Petroleum Exporting Countries (OPEC) and its allies. Lastly, precious metals also saw fluctuations, with gold prices falling 0.2% to settle at $2,950.70 per troy ounce, while silver registered a loss of 1.8%, closing at $32.9 per ounce.
In summary, while the market faces significant pressures from fluctuating economic indicators and company performances, strategic insights remain crucial for navigating this complex landscape..