The blue-chip Dow Jones industrial average suffered its worst day of the year so far, plummeting more than 700 points as investors turned fearful about the U.S. economy’s health.
At the Feb. 21 closing bell, the Dow Jones tanked 748.63 points, or 1.69 percent, to 43,428.02. The index registered a 2.5 percent weekly decline but remains up 2 percent for the year.
The tech-heavy Nasdaq Composite Index fell 438.36 points, or 2.2 percent, to 19,524.01. It also recorded a 2.5 percent weekly loss and is up 1.1 percent so far in 2025.
The S&P 500 tumbled 104.39 points, or 1.71 percent, to 6,013.13. The index fell 1.66 percent this week but has kept its 2025 gains intact, rising 2.2 percent. The S&P 500 had come off fresh record highs earlier in the trading week.
What Happened on Wall Street
A blend of expiring options and poor economic data fueled the sharp sell-off.Approximately $2.7 trillion of options tied to equities and exchange-traded funds (ETFs) was poised to expire at the end of the trading week, meaning these contracts are no longer valid. Expiration dates typically trigger massive price swings.
Also, lackluster data led to concerns about the national economy’s broader health.
Chris Williamson, chief business economist at S&P Global Market Intelligence, says the worse-than-expected figures were fueled by uncertainty regarding the new administration’s policies and frigid winter weather.
“Digging into the anecdotal reporting from companies on the PMI survey questionnaires, U.S. services firms widely blamed lower sales and activity levels on uncertainty and instability surrounding new government policies in the U.S., including federal spending cuts and tariff-related developments,” Williamson said.
“Adverse (cold) weather also contributed in some cases, as it had in January, providing some hope that at least some of the recent weakness may prove temporary.”
U.S. manufacturing held steady as the S&P Global PMI remained in expansion mode for the second consecutive month and rose to the highest level since June 2024. It also topped market estimates amid growing factory output and tepid employment gains.
Additionally, year-ahead inflation expectations clocked in at 4.3 percent, up from 3.3 percent in January. The five-year outlook surged to 3.5 percent, the highest since 1995.
The abysmal readings were driven by “fears that tariff-induced price increases are imminent,” says Joanne Hsu, director of consumer surveys.
“Expectations for personal finances and the short-run economic outlook both declined almost 10 percent in February, while the long-run economic outlook fell back about 6 percent to its lowest reading since November 2023,” Hsu stated in the report.
In the first month of the new administration, President Donald Trump has proposed reciprocal tariffs on all trading partners, 25 percent levies on steel and aluminum imports, and 25 percent import duties on Canadian and Mexican goods entering the United States.
Not the Time to Panic, Experts Say
Investors should refrain from panicking, according to Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report.“Options expiration could be adding to some of the volatility from the weaker economic data, but we try not to read too much into one set of data points,” Tentarelli said in a note emailed to The Epoch Times.
“We do not think that investors should overreact to one set of data points, especially with the S&P 500 just coming off of new highs this week. If we see a series of softer than forecast economic data points, that would raise more of a red flag.”
Gina Bolvin, president of Bolvin Wealth Management Group, still believes the fundamentals are solid enough to keep the bull market running wild.
“There’s still a strong foundation in place for the bull market to continue. Earnings growth is up 15 percent, and while the Fed may be on a pause, their next move is a cut,” Bolvin said in a note emailed to The Epoch Times.
The Federal Reserve has suspended its rate-cutting cycle, signaling that it will not take any policy action until there is further progress on inflation. Additionally, the monetary authorities are beginning to examine any effects of Trump’s changes to trade and immigration policy.
Ultimately, “cranky” consumers could be good news for the United States as it could help drive inflation lower in the coming months, Bolvin added. The annual inflation rate climbed for the fourth consecutive month in January, reaching 3 percent for the first time since June.
Walmart shares slumped about 6 percent during the Feb. 20 trading session when the big-box retailer forecast sales and profit for the current year below market estimates.
CFO John David Rainey suggested on a post-earnings call that consumer spending could slow, though he described shoppers as “resilient” and would focus on value.
“Our outlook assumes a relatively stable macroeconomic environment, but acknowledges that there are still uncertainties related to consumer behavior and global economic and geopolitical conditions,” Rainey said.
Despite potential headwinds from the Trump tariffs, Jan Hatzius, chief economist and head of Goldman Sachs Research, thinks the world’s largest economy’s growth prospects are still on track.
While there have been seismic shifts in the economic backdrop, the financial institution’s outlook from November 2024 has been little changed, Hatzius noted.
