The S&P 500 and Nasdaq Composite closed lower on Monday. The market’s attempt to bounce back from Friday’s sell-off failed. The S&P 500 declined 0.5% to 5,983.25.
The Nasdaq Composite fell 1.2% to 19,286.92. The Dow Jones Industrial Average gained 33.19 points, or 0.08%, to 43,461.21. Shares of major tech companies came under pressure.
This led the Nasdaq into negative territory for the year. Alphabet tumbled 10.5%. Amazon slid about 1% after an analyst report suggested the company is cutting spending on data centers.
This raised fears of weakness in the artificial intelligence trade. Nvidia, a chipmaking giant, pulled back 3%. President Trump’s trade war against major U.S. trading partners weighed on market sentiment.
Trump said tariffs on Canada and Mexico would go into effect next week after the monthlong postponement deadline ends. “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 moves follow a volatile week for the stock market.
The Dow and Nasdaq finished last week more than 2% lower. The S&P 500 shed more than 1%. On Friday, the Dow fell over 700 points.
The S&P 500 and Nasdaq dropped 1.7% and 2.2%, respectively.
Market turbulence impacts major tech stocks
February data raised concerns over the state of the U.S. economy.
The purchasing managers’ index numbers showed that the U.S. services sector contracted for the month. The University of Michigan’s consumer sentiment index came in weaker than expected. This week, key readings on corporate earnings and the economy are anticipated.
Earnings reports from Home Depot and Lowe’s on Tuesday and Wednesday will provide insights into the health of U.S. consumers. Nvidia’s earnings report on Wednesday evening could impact the market significantly. The January reading of the personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, is due on Friday.
“Friday’s PCE for January will be extra important for markets, because it will help to confirm if inflation did spike at the start of 2025, given that the other January inflation readings, such as CPI and PPI, came in very strong for January,” said Clark Bellin, president and chief investment officer at Bellwether Wealth. Bellin added, “Regardless of what Friday’s PCE says, it’s likely that the Federal Reserve remains on hold when it comes to any interest rate decision for at least the next six months.”
Aerospace and defense stocks continue to face challenges. The defense ETF inched down 0.3% on Monday and has declined around 7.7% month-to-date.
Year-to-date, the defense ETF is down more than 2%. President Trump’s calls for Department of Defense budget cuts have contributed to the sector’s struggles. Investors are being advised to seek out stocks that may be unnecessarily beaten down during periods of market volatility.
“The likely transience of the levels of uncertainty that have roiled the stateside markets likely presents yet another opportunity to seek out ‘babies that get thrown out with the bathwater’ in market downdrafts,” said John Stoltzfus, chief investment strategist at Oppenheimer. PC makers are expected to raise prices in response to proposed U.S. tariffs on Chinese goods. Bank of America analysts noted that companies like Dell, HP, and Apple would likely pass the added costs onto buyers, raising prices by at least 10%.
“Businesses may delay upgrades, and lower price PCs could see an impact from more price-sensitive customers,” said analyst Wamsi Mohan. Despite the ongoing tariff concerns, UBS remains optimistic about the stock market’s performance for the remainder of the year. “We anticipate further volatility amid tariff concerns, but we continue to expect gains for the S&P 500 and see the index reaching 6,600 by year-end,” the firm’s strategists wrote.
“We believe a solid U.S. economy, healthy corporate earnings growth, and further advancements in AI should support the rally.”
