Friday, Feb 21

👋 Good morning! Stocks closed lower Thursday with the S&P 500 retreating 0.4% from its Wednesday record close. The Nasdaq fell 0.5% and Walmart's cautious outlook sent the Dow down 1%.

🤔 The stock market is making a big assumption: The S&P 500 has been surfing record highs all week, and yet, as we cataloged Thursday, the mood in the room isn't great. And concerns have been bubbling up on Wall Street about the market failing to price in potential disruptions from myriad Trump policies, as investors treat the president's proclamations like the boy who cried wolf and assume that bluffs will be called and 11th-hour reprieves will be granted. And since stocks are high partly because of the pro-business sentiment, strategists see the potential for a 5% to 10% correction.

‌

🛒 A cautious Walmart: Walmart stock fell 6.5% Thursday following its quarterly results, as disappointing guidance overshadowed the earnings beat, handing the company one of its worst days since 2023. The outlook referenced "uncertainties related to consumer behavior and global economic and geopolitical conditions." The latter being, of course, a reference to tariffs, which CFO John David Rainey told us could push prices up. 

‌

🤖 More Chinese AI momentum: Alibaba stock jumped 8% Thursday following its quarterly results, which showed significant AI momentum. The company also added to its meme stock cred with GameStop CEO Ryan Cohen upping his stake to nearly $1 billion. But as the results showed, the company's AI story is in its early chapters. Like Amazon, retail still rules the roost. 

‌

🏷️ More caution from the Fed: St. Louis Fed president Alberto Musalem issued another word of caution about inflation, pointing to the effects of potential Trump tariff and immigration measures and noting the twin risks of "more restrictive" monetary policy and the potential effects on the labor market. Still, Musalem and other Fed officials this week recognized the need for more data and the fact that with a solid labor market, the holding pattern of "modestly restrictive" rates isn't causing any problems.

‌

📆 Friday's calendar: An empty corporate calendar greets investors Friday morning, but economic activity readings from S&P Global for the manufacturing and services sectors will join the University of Michigan's final sentiment reading of the month.

✈️ Delta offers $30,000 to passengers on the flight that crashed in Toronto.

‌

⚡️ Rivian posts mixed earnings, touts positive steps.

‌

💰 Trump toys with 'DOGE dividend' — but the math doesn't add up yet.

‌

🚊 Trump takes aim at $4B in funding for California high-speed rail.

‌

🏦 Musk says he is thinking of auditing the Fed.

‌

⏸️ Fed should hold policy rate steady for 'some time,' Kugler says.

‌

‌

The top contributors to the rally have been Meta (13.3% as of Wednesday’s close), Nvidia, Walmart (4.8%), JPMorgan (4.6%), Amazon (4.1%), Palantir (4.0%) and Eli Lilly (3.9%).

‌

It’s a sharp contrast with 2024, when the Magnificent Seven alone accounted for 55% of the S&P 500’s gain.

‌

While the benchmark index was closing at a new record high this week, Nvidia shares were still trading more than 5% below the record high close from Jan. 6.

‌

Then there’s Nvidia’s slowing growth trajectory. The company’s first AI-assisted blowout quarter shocked the market in 2023. Revenue kept climbing and the company kept beating estimates, with peak sales growth so far of 265% in the fiscal fourth quarter of 2024.

‌

The estimated increase this time around is 73% — huge by any normal measure of a company, let alone one of Nvidia’s size, but a sharp slowdown from the go-go days of 2023 and 2024. And even when Nvidia’s numbers wow investors, the stock price doesn’t always follow suit because of forecasts or commentary around supply struggling to keep up with demand. Still, better to have not enough supply than not enough demand.

‌

Last quarter, Nvidia shares rose just 0.5% the day after it reported. In the period before that, the stock slumped 6.3%. In both instances, the S&P 500 was little changed.

‌

As the world’s second-most valuable company and engine for many of its Big Tech peers, Nvidia still occupies a lot of mindshare for investors.

Fundstrat's Mark Newton told Yahoo Finance that it should.

‌

"I do think Nvidia is important. We heard from the conference calls of the Metas and the Amazons and the Alphabets how much they all reference Nvidia saying that, yes, they're doing lots of capital spending and a lot of money is going into Nvidia," Newton said. "So there's continuing to be very high demand. I think that it's going to outpace supply. I don't think this this company and this stock is going away anytime soon."

‌

Certainly a $3.4 trillion company at the center of the AI trade — and still the center of the market — shouldn't be ignored. But in a broadening world, the center doesn't mean what it used to.

Chief executives haven't been this confident in their business outlooks in three years.

‌

Data released Thursday showed the Conference Board's measure of CEO confidence increased by nine points in the first quarter of 2025 to a reading of 60, its highest level in three years. The Conference Board added that the move above 50 indicates a shift from "cautious optimism" to "confident optimism" among business leaders.

This upbeat sentiment from corporate leaders runs counter to how consumers have reported feeling in recent surveys. In February, the University of Michigan's consumer sentiment survey hit a seven-month low amid concerns about higher inflation over the next year.

‌

And on Friday, we'll get the next reading. 

‌

— Josh Schafer, Markets Reporter

‌

Read more here.

Friday

‌

• Economic data: S&P Global US manufacturing, February preliminary (51.2 prior); S&P Global US services PMI, February preliminary (52.9 prior); S&P Global US composite PMI, February preliminary (52.7 prior); University of Michigan sentiment, February final (68.7 prior)

‌

• Earnings: No notable earnings releases.