The stock market stumbled on Monday, with the S&P 500 dropping by 0.5% to close at 5,983.25. The Nasdaq Composite fell 1.21%, ending the session at 19,286.92. The Dow Jones Industrial Average managed a slight gain of 33.19 points or 0.08%, closing at 43,461.21.
Major tech companies faced significant pressure, contributing to the Nasdaq’s negative performance. Shares of a major tech firm plunged 10.5%, significantly impacting the tech-heavy index. Another company shed about 1% following an analyst report indicating cutbacks on data center spending, raising concerns about the strength of the artificial intelligence sector.
Another tech giant also pulled back by 3%. Sentiment was further dampened by ongoing concerns over President Trump’s trade policies, targeting major U.S. trading partners including Canada and Mexico. “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 declines followed a rough week for the markets. By the end of last week, the Dow and Nasdaq had decreased by over 2% each, and the S&P 500 had dropped by more than 1%. On Friday alone, the Dow fell by more than 700 points, while the S&P 500 and Nasdaq were down 1.7% and 2.2%, respectively.
These drops came after February’s data raised concerns about the U.S. economy’s strength. The Purchasing Manager’s Index showed a contraction in the U.S. services sector, while the University of Michigan’s consumer sentiment index was weaker than anticipated. Looking ahead, the market will focus on key corporate earnings and economic data.
Tech sell-off impacts Nasdaq significantly
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 is particularly significant due to the company’s prominence in the AI industry.
Additionally, the January personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation measure, will be released on Friday. “Friday’s PCE for January will be extra important for markets, because it will help to confirm if inflation did indeed spike at the start of 2025, since 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. Nonetheless, Bellin believes that the Federal Reserve is likely to keep interest rates unchanged for at least the next six months.
The defense sector continues to struggle, with the defense ETF dipping 0.3% on Monday and declining approximately 7.7% for the month. President Donald Trump’s proposed Department of Defense budget cuts have further pressured defense companies. Year to date, the defense ETF is down more than 2%.
John Stoltzfus, chief investment strategist at Oppenheimer, suggests that investors should look for stocks that are unnecessarily beaten down amid volatility, provided that the economy remains strong. U.S. PC manufacturers are expected to increase prices by at least 10% due to proposed tariffs on Chinese goods, according to a note from Bank of America. “If tariffs of 10–25% are imposed, PC makers like Dell, HP, and Apple will likely pass the added costs onto buyers,” wrote analyst Wamsi Mohan.
This could lead to delayed upgrades by businesses and impact lower-priced PCs due to price-sensitive customers, although it could offset margin pressure. UBS remains optimistic about stock market gains despite tariff concerns. “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,” UBS strategists stated.
They believe a robust U.S. economy, healthy corporate earnings growth, and advancements in AI will continue to support the rally.
