Stocks limped into the weekend as a string of economic data sparked concerns about slower-than-expected economic growth and sticky inflation.
In economic data, investors will be closely watching the release of the Fed’s preferred inflation gauge, the “core” Personal Consumption Expenditures (PCE) index, on Friday. A second estimate of gross domestic product (GDP) for the fourth quarter as well as updates on consumer confidence and housing prices are expected.
With inflation still above the Fed’s target and the labor market on solid footing, markets are betting that the Federal Reserve will not cut interest rates in the first half of 2025.
A fresh look at a key inflation measure will come on Friday with the January PCE release. Economists project annual “core” PCE — which excludes the volatile categories of food and energy — to have clocked in at 2.6% in January, down from the 2.7% seen in December. Over the prior month, economists project “core” PCE at 0.3%, above the 0.2% seen the month prior.
Due to a difference in components, the data is expected to show a more muted pace of price increase for the month of January than the Consumer Price Index (CPI). That report showed the largest rise in core prices since April 2023.
Morgan Stanley chief US economist Michael Gapen wrote in a note to clients that a 2.6% increase in core PCE for January “implies a meaningful step down in the 12-month pace of core inflation” and is in line with their call for a quarter-percentage-point interest rate cut from the Fed in June.
The market’s AI darling is set to report quarterly results after the bell on Wednesday. Analysts expect Nvidia to report adjusted earnings per share of $0.84, up 63% from the year prior. Meanwhile, revenue is projected to be $38.26 billion, up 73% from the same quarter last year.
Investors will be waiting to hear what Nvidia CEO Jensen Huang says about the environment for AI chip demand and whether he will address potential rising competition in the AI space from China’s DeepSeek.
The report comes as most of the “Magnificent Seven” tech stocks, including Nvidia, have lagged the S&P 500 so far this year and aren’t contributing nearly as much to the gains seen in the benchmark average as in the past two years.
“The stock could be volatile post results, but we expect positive momentum to resume as investors look forward to Nvidia’s leading new product pipeline (GB300, Rubin) and total addressable market expansion into robotics and quantum technologies at upcoming GTC conference (March 17),” Bank of America analyst Vivek Arya wrote in a note to clients.
While stocks have been resilient through a wide swath of headlines about President Donald Trump’s policies, concerns are appearing in various survey data points.
On Friday morning, the University of Michigan’s consumer sentiment survey index hit its lowest level since November 2023 while economic output measured by S&P Global’s flash US composite PMI tumbled to its lowest level in 17 months.
Concerns about tariffs and their potential to boost inflation were front and center in both releases.
“The upbeat mood seen among US businesses at the start of the year has evaporated, replaced with a darkening picture of heightened uncertainty, stalling business activity and rising prices,” S&P Global Market Intelligence chief economist Chris Williamson said in the release. “Companies report widespread concerns about the impact of federal government policies, ranging from spending cuts to tariffs and geopolitical developments.”
Williamson added that optimism about the year ahead has swung to “one of the gloomiest since the pandemic.”
Stocks sold off on Friday, with the S&P 500 and Dow down more than 1.7% and the Nasdaq Composite sliding over 2%. While it was just one day of selling in a market that’s been hovering near record highs and there were a few gloomy data points, the market action reflects some jitteriness among investors right now.
With stock valuations near a record high, Citi US equity strategist Scott Chronert told Yahoo Finance the market’s path higher in 2025 will likely come with more bumps as investors attempt to price in the impacts of Trump’s policies.
“Our view is that there’s still upside to the S&P between now and year-end,” Chronert said. “But between here and there is probably an ongoing period of volatility and concern that keeps us looking for pullbacks and better buying points.”
Economic data: Chicago Fed activity index, January (0.15 prior); Dallas Fed manufacturing activity, February (14.1 prior);
Earnings: Chegg (CHGG), Cleveland-Cliffs (CLF), Diamondback Energy (FANG), Domino’s Pizza (DPZ), Hims & Hers (HIMS), Riot (RIOT), Trip.com (TCOM), Zoom (ZM)
Economic data: FHFA house price index, month-over-month, December (0.3% prior); S&P CoreLogic CS 20-city year-over-year, non-seasonally adjusted, December (4.33% prior); Conference Board Consumer Confidence, February (103.5 expected, 104.1 prior); Richmond Fed manufacturing index, February (-4 prior);
Earnings: American Tower (AMT), AMC (AMC), Cava (CAVA), First Solar (FSLR), The Home Depot (HD), Instacart (CART), Intuit (INTU), Keurig Dr. Pepper (KDP), Krispy Kreme (DNUT), Lemonade (LMND), Lucid (LCID), Planet Fitness (PLNT), Workday (WDAY)
Economic data: MBA Mortgage Applications, week ending Feb. 21 (-6.6 prior); New home sales month over month, January (-2.7% expected, +3.6% previously); Building permits month-over-month, January final (+0.1% prior)
Earnings: Nvidia (NVDA), Anheuser-Busch InBev (BUD), Advance Auto Parts (AAP), C3.ai (AI), Clear Secure (YOU), Lowe’s (LOW), Marathon Digital Holdings (MARA), NRG Energy (NRG), Salesforce (CRM), Snowflake (SNOW), Stellantis (STLA)
Economic data: Fourth quarter GDP, second revision (+2.3% annualized rate expected, +2.3% previously); Fourth quarter personal consumption, second revision (+4.2% previously); Initial jobless claims, week ended Feb. 22, (219,000 previously); Durable goods orders, January preliminary (+2.2% expected, -2.2% previously)
Earnings: Archer Aviation (ACHR), Clover (CLOV), Duolingo (DUOL), Norwegian Cruise Line (NCLH), Toronto-Dominion Bank (TD), SoundHound AI (SOUN), Vistra Corp. (VST)
Economic data: PCE inflation, month over month, January (+0.3% expected, +0.3% previously); PCE inflation, year over year, January (+2.5% expected, +2.6% previously); “Core” PCE, month over month, January (+0.3% expected, +0.2% previously); “Core” PCE, year over year, January (+2.6% expected; +2.8% previously); MNI Chicago PMI, February (39.5 prior)
Earnings: fuboTV (FUBO)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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