The stock market faced challenges on Monday as major indexes struggled to recover from Friday’s steep sell-off. The S&P 500 lost 0.5%, closing at 5,983.25, while the Nasdaq Composite tumbled 1.21%, ending the session at 19,286.92. The Dow Jones Industrial Average managed a narrow gain, adding 33.19 points, or 0.08%, to close at 43,461.21.
Major tech companies came under pressure, pushing the Nasdaq into negative territory for 2025. One prominent tech stock tumbled 10.5%, dragging the tech-heavy index down. Reports suggesting another major tech company is cutting spending on data centers raised fears of weakness in the artificial intelligence trade.
Chipmaking giant Nvidia pulled back 3%. President Trump’s trade policies against major U.S. trading partners continued to weigh on market sentiment. Trump announced that tariffs on Canada and Mexico would be reinstated after the month-long postponement deadline ends next week.
Scott Helfstein, head of investment strategy at Global X, said, “The White House had investor support for the first four weeks of the term, but the honeymoon may be coming to an end.”
Last week’s market decline saw the Dow and Nasdaq finish more than 2% lower, while the S&P 500 shed more than 1%. February’s economic data, including a contraction in the Purchasing Managers’ Index (PMI) for services and a weaker-than-expected University of Michigan consumer sentiment index, drove those declines. Investors are now focusing on key readings on corporate earnings and the economy.
Earnings reports from Home Depot and Lowe’s on Tuesday and Wednesday will provide insights into consumer health.
Tech stocks pressure markets further
Nvidia’s highly anticipated earnings report on Wednesday evening will be closely watched, as the AI-linked chipmaker remains one of the largest companies by market cap.
The January reading of the personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, will be released on Friday. Clark Bellin, president and chief investment officer at Bellwether Wealth, said, “Friday’s PCE for January will be extra important for markets, as it will help confirm if inflation did indeed spike at the start of 2025.” However, Bellin added, “Regardless of what Friday’s PCE says, it’s likely that the Federal Reserve remains on hold regarding any interest rate decision for at least the next six months.”
Aerospace and defense stocks continue to struggle, with the sector inching down 0.3% on Monday and declining around 7.7% month to date. President Donald Trump’s calls for Department of Defense budget cuts have pressured defense companies lower, leading to a year-to-date decline of more than 2%.
John Stoltzfus, chief investment strategist at Oppenheimer, advised investors to look for stocks that are unnecessarily beaten down during market volatility. The likely transience of the levels of uncertainty that have roiled the stateside markets presents an opportunity to seek out ‘babies that get thrown out with the bath water’ in market downdrafts,” Stoltzfus wrote to clients on Monday. He added that this strategy assumes the economy, consumer sentiment, labor market, and business environment remain strong.
Bank of America analysts predict that PC makers will likely raise prices by at least 10% in response to proposed U.S. tariffs on Chinese goods. Companies like Dell, HP, and Apple are expected to pass these costs onto buyers due to their slim profit margins. Analyst Wamsi Mohan noted that price hikes could decrease demand and lead to broader supply chain instability.
Long-term, these companies are working to reduce dependency on China, potentially increasing short-term costs and complexity but making the market more resilient to future disruptions. Despite tariff concerns, UBS expects stocks to see more gains. The firm predicts the S&P 500 will reach 6,600 by year-end, implying a 9.8% upside from Friday’s close.
UBS strategists noted, “We believe a solid U.S. economy, healthy corporate earnings growth, and further advancements in AI should support the rally.”
Photo by; Behnam Norouzi on Unsplash
