Stocks End Volatile Week Mixed on Tariffs, Stagflation Concerns, Tech Earnings

One chief investment officer based in New York City sees the stock market’s recent declines as ’simply garden variety volatility.’

Traders work on the New York Stock Exchange floor on Feb. 24, 2025. Spencer Platt/Getty Images

U.S. stocks were in for a roller-coaster ride last week, led by techs, amid concerns over tariffs, stagflation, and a slowdown in tech earnings.

After several sharp reversals that added to market volatility, major equity indexes closed mixed for the week.

The S&P 500 ended Feb. 28 at 5,954, down 0.98 percent for the week; the Dow Jones Industrial Average closed at 43,840, up 0.95 percent; the Nasdaq finished the week at 18,847, down 3.47 percent; and the small-cap Russell 2000 was down 1.47 percent to end at 2,163.

Trading for the new week began with bargain hunters stepping in to buy shares, pushing equity indexes higher at the market opening on Feb. 24. Adding to the positive sentiment at the opening were better-than-expected earnings from Warren Buffett’s Berkshire Hathaway over the previous weekend, thanks to substantial gains in its insurance portfolio.

However, the positive sentiment quickly reversed as sellers of tech shares took the upper hand amid concerns that artificial intelligence (AI) spending was tapering off and about Washington’s determination to proceed with its plans to impose tariffs on Canada and Mexico.

Selling pressure continued on Feb. 25 following the Conference Board’s disappointing news on the U.S. consumer. The February consumer confidence index registered its most significant decline since Aug. 21, 2024, as consumers turned pessimistic over current and future economic conditions, especially the state of the labor market.

“This is the third consecutive month on month decline, bringing the index to the bottom of the range that has prevailed since 2022,” Stephanie Guichard, senior economist for global indicators at The Conference Board, said in the organization’s statement.

“Of the five components of the index, only consumers’ assessment of present business conditions improved, albeit slightly. Views of current labor market conditions weakened. Consumers became pessimistic about future business conditions and less optimistic about future income. Pessimism about future employment prospects worsened and reached a ten-month high.”

The precipitous decline in consumer confidence follows a similar decline in the University of Michigan’s Consumer Sentiment Index last week and soft guidance by retail giant Walmart. They all point to slower consumer spending and economic growth, a prospect confirmed by weak gross domestic product and personal spending reports toward the end of the week.

In another sign of a weakening economy, new home sales declined sharply in January, as persistently high mortgages and affordability are beginning to cool off the red-hot housing market.

While signs of a slowing economy become more evident almost every week, there is plenty of evidence that inflation remains elevated, including the Federal Reserve’s favorite inflation gauge, the personal consumption expenditure index (PCE), released on Feb. 28. It showed that prices consumers pay climbed by 2.5 percent in January, in line with the December 2024 rise and above the Federal Reserve’s target of 2 percent.

“Today’s PCE provides a little comfort after the worrisome CPI print for January,” David Russell, global head of market strategy at TradeStation, told The Epoch Times.

“The drop in personal spending confirms the negative retail sales data we got earlier, suggesting the economy started 2025 on a soft footing. Combined with the weak data so far in February, growth is becoming more of a concern for Wall Street. The consumer may finally be throwing in the towel.”

The combination of slower growth and elevated inflation has renewed fears that the economy will head to stagflation, the worst macroeconomic environment for equities. Slower growth hurts earnings; higher inflation hurts valuations through higher interest rates.

Earnings from Nvidia on the afternoon of Feb. 26 added to Wall Street’s anxiety over tariffs and the economy’s direction. The tech giant reported earnings and revenues that beat market expectations but fell short of reassuring bullish tech investors that AI spending can continue to drive tech earnings.

This change in investor sentiment became evident on the morning of Feb. 27 when Wall Street was in for yet another reversal led by a sharp decline in Nvidia’s shares.

Selling continued for most of the Feb. 28 trading session, led by a sharp decline in personal spending. Yet another massive reversal toward the closing sent all equity indexes sharply higher for the day.

Robert Ruggirello, chief investment officer of Brave Eagle Wealth Management, based in New York City, said he sees the stock market’s recent declines as “simply garden variety volatility.” This type of volatility is mainly caused by February’s volatile nature and the significant gains throughout January.

Ruggirello said that’s why he doesn’t believe that the recent market declines are a sign of a deeper bear market on the horizon.

“It’s important for investors to be opportunistic, as any S&P 500 level below, at, or just above 6,000 can represent an entry point for investors sitting on too much cash and missing out on the rally since the November 2024 presidential election,” he told The Epoch Times.