(Bloomberg) — Stocks got hit and bonds surged as another disappointing reading on the US consumer fueled concern about the health of the world’s largest economy.
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Another big drop in the Nasdaq 100 pushed its four-day loss to around 5%, the most since early September, while a gauge of megacaps slipped into correction territory. Selling was heaviest in speculative corners of the market, with a 7% slide in Bitcoin spurring a plunge in exchange-traded funds specializing in crypto. A rally in Treasuries drove 10-year yields to their lowest levels in 2025.
US consumer confidence fell the most since August 2021 on concerns about the outlook for the broader economy. The data followed recent disappointments on the retail, services and housing fronts. That’s prompted traders to boost their bets on Federal Reserve rate cuts this year even as inflation pressures seem to be intensifying.
“The market still seems more worried about growth than inflation,” said Chris Verrone at Strategas.
To Keith Lerner at Truist Advisory Services, while the primary stock-market uptrend remains intact and recession risks remain relatively low, the near-term risk/reward appears more mixed.
“We have seen modest deterioration in earnings, technical, and economic trends that warrants a more neutral equity posture and slightly higher cash,” he said.
The S&P 500 fell 0.3%. The Nasdaq 100 slid 1%. The Dow Jones Industrial Average rose 0.4%. A gauge of the “Magnificent Seven” megacaps sank 2%. On the eve of Nvidia Corp.’s results, the shares slumped as much as 4.5%, before paring losses. Apple Inc. rose.
The yield on 10-year Treasuries sank nine basis points to 4.31%. Money markets are now pricing in more than two quarter-point reductions by the Fed in 2025. A dollar gauge slid 0.2%.
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“Markets have suddenly begun declining on fears over a slowdown in growth. Wasn’t everyone just worried about too-strong growth and higher inflation a couple of weeks ago?” said Bespoke Investment Group strategists. “We would also note that three of the five Fed manufacturing reports released in February were all in growth territory. So not all the news is bad. The economic outlook is uncertain, but isn’t it always?”
To Jeff Roach at LPL Financial, consumers are increasingly nervous about the unknown impacts from potential tariffs and could pull forward consumer demand as they anticipate higher prices for imports in the near future.
One note of caution from Roach: Consumer surveys are much more volatile than the hard data of retail sales. That means the Fed will not likely change their stance on monetary policy at the next couple meetings, according to the economist.
Inflation expectations over the coming year increased to the highest since May 2023. Fed officials including Chair Jerome Powell have signaled they’re keeping interest rates steady until progress on inflation resumes.
“Consumer confidence continues to come off its election-fueled sugar high from November,” said Bret Kenwell at eToro. “Economic uncertainty remains elevated, whether that’s around tariffs or more US-centric data like inflation or retail sales.”
That’s why this week’s reading on prices will be key. The Fed’s preferred inflation metric is expected to cool to the slowest pace since June.
The core personal consumption expenditures price index — which excludes often-volatile food and energy costs — probably rose 2.6% in the year through January in Commerce Department data due on Friday. Overall PCE inflation likely eased on an annual basis as well.
“Investors should keep an eye on this week’s PCE report,” said Kenwell. “It will give another clue as to how consumers are feeling about their purchasing power. An in-line or lower reading may act as a relief catalyst for consumers and investors alike.”
Before that, traders will be wading through Nvidia’s earnings. They will arrive at a critical juncture, with US stocks vulnerable from a technical and systematic standpoint.
Not only have equities rejected a move beyond their all-time highs, the market is also in a state of vulnerability from three of it biggest drivers. Retail flows are fading, trend followers are estimated to be sellers in every scenario and option flows are unfavorable.
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“There are fewer volatility buffers in place to stabilize the market” and a weak print from Nvidia could just be the catalyst “we need to send volatility significantly higher,” the option strategists at Tier 1 Alpha said.
Nvidia’s numbers are the most closely watched barometer of the AI boom. Investors also will be looking for signs that the company is transitioning smoothly to its new Blackwell design from the older Hopper lineup. The shift may cause customers to slow purchases until there’s better availability of the new products, according to some analysts.
In Wednesday’s Nvidia earnings report, investors will examine not only whether the chipmaker beats projections for earnings, revenues, and units sold, but will also listen closely to what chief Jensen Huang says about the company’s prospects going forward, according to Mary Ann Bartels at Sanctuary Wealth.
There’s growing “suspicion” among investors about the scope for more S&P 500 gains at a time when European and Chinese stocks are outperforming, according to Bank of America Corp. strategist Michael Hartnett.
“The longer it takes and the harder it is for the S&P to get to new highs, the doubts grow,” Hartnett said in an interview on Bloomberg Television.
He has recommended international equities over US peers this year as he expects the Magnificent Seven megacaps to wobble. While he said investors are far from pessimistic about big tech, these stocks are vulnerable to declines if the trade “doesn’t keep working.”
Corporate Highlights:
UnitedHealth Group Inc. shares fell after a report that Republican Senator Charles Grassley is launching an inquiry into the insurer’s Medicare billing practices.
Home Depot Inc. expects a key sales metric to return to growth this year, though the retailer cautioned that housing demand won’t change significantly in the near term.
Nvidia Corp., the top provider of chips used in new artificial intelligence computers, is extending a partnership with networking-gear maker Cisco Systems Inc. in a push aimed at making it easier for corporations to deploy AI systems.
ASM International NV’s first-quarter revenue forecast beat estimates as an artificial intelligence boom drives demand for the Dutch semiconductor-equipment maker’s products.
PayPal Holdings Inc. predicted growth in earnings and transaction margins in coming years, as its new leadership continues to streamline the sprawling business.
Eli Lilly & Co. is ramping up the fight against cheaper, copycat versions of Zepbound by lowering prices for a version of its blockbuster obesity drug.
Hims & Hers Health Inc. said that it will soon stop selling some compound weight-loss drugs.
Chegg Inc. is weighing “strategic alternatives” for its business, saying that traffic to its web-based education platform has been decimated following Google’s launch of an artificial intelligence-powered summary tool.
Zoom Communications Inc. projected slower-than-expected revenue growth for the year, dimming optimism that an expanded suite of products will bring a sales surge.
Krispy Kreme Inc.’s net revenue forecast disappointed. The company is weighing refranchising some of its businesses in international markets even as it expands its distribution network in the US, Chief Executive Officer Josh Charlesworth said.
Bank of Montreal and Bank of Nova Scotia kicked off Canadian bank earnings season with strong results from their capital-markets divisions amid an increase in trading activity.
Unilever Plc pushed out Chief Executive Officer Hein Schumacher after less than two years, signaling that the board wasn’t satisfied with the pace of restructuring at the maker of Hellmann’s mayonnaise and Ben & Jerry’s ice cream.
Key events this week:
US new home sales, Wednesday
Nvidia earnings, Wednesday
Fed’s Raphael Bostic speaks, Wednesday
Eurozone consumer confidence, Thursday
US GDP, durable goods, initial jobless claims, Thursday
Fed’s Jeff Schmid, Beth Hammack, Patrick Harker, Michael Barr, Michelle Bowman speak, Thursday
Japan Tokyo CPI, industrial production, retail sales, Friday
US PCE inflation, income and spending, Friday
Fed’s Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.3% as of 2:40 p.m. New York time
The Nasdaq 100 fell 1%
The Dow Jones Industrial Average rose 0.4%
The MSCI World Index fell 0.3%
Bloomberg Magnificent 7 Total Return Index fell 2%
The Russell 2000 Index fell 0.3%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.4% to $1.0508
The British pound rose 0.3% to $1.2664
The Japanese yen rose 0.4% to 149.14 per dollar
Cryptocurrencies
Bitcoin fell 7.3% to $87,125.15
Ether fell 7.3% to $2,443.16
Bonds
The yield on 10-year Treasuries declined nine basis points to 4.31%
Germany’s 10-year yield declined two basis points to 2.46%
Britain’s 10-year yield declined six basis points to 4.51%
Commodities
West Texas Intermediate crude fell 2.4% to $68.99 a barrel
Spot gold fell 1.4% to $2,910.02 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Denitsa Tsekova, Cecile Gutscher, Sujata Rao, Robert Brand and Aya Wagatsuma.
