U.S. stocks had overall mixed performance last week, with the Dow Jones Industrial Average rising 0.95% while other major indexes declined for a second straight week.
Growth shares underperformed, and technology stocks weakened amid regulatory concerns.
The Nasdaq Composite notched its worst weekly drop since early September, led by the so-called Magnificent Seven, as fears grew that the AI-fueled rally may be losing steam.
NVIDIA shares tumbled 8.48% on Thursday following its earnings release. Tariff issues loomed, as President Donald Trump reiterated plans for new levies by March 4.
A key economic data release was the core personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, up 0.3% in January and 2.6% year-over-year.
Meanwhile, personal incomes climbed 0.9%, but consumer spending pulled back. The Conference Board’s Consumer Confidence Index fell 7 points to 98.3, its sharpest drop since August 2021, while its expectations component dipped below 80, a potential recession signal. Inflation expectations for the next 12 months also rose to 6%.
Elsewhere, the Commerce Department reported 2.3% annualized fourth-quarter GDP growth for 2024. Jobless claims rose to 242,000, suggesting some labor market softening. U.S. Treasuries rallied, with intermediate maturities outperforming amid cautious economic indicators. Municipal bonds also advanced but slightly underperformed Treasuries.
In Europe, the pan-European STOXX Europe 600 Index advanced 0.60%, marking its longest weekly gains since August 2012. Defense shares and positive earnings offset U.S. trade concerns. Germany’s DAX rose 1.18%, and Italy’s FTSE MIB gained 0.61%, while France’s CAC 40 slipped 0.53%. The UK’s FTSE 100 added 1.74%. Encouraging corporate results in the defense sector provided a further boost, while regional leaders continued discussions about potential U.S. tariffs.
Preliminary data for February inflation were mixed: Germany’s inflation held at 2.8%, slightly above forecasts. Italy’s consumer price growth stayed at 1.7%, while France’s rate dropped to a four-year low of 0.9%. Final fourth-quarter GDP figures confirmed contractions of 0.2% in Germany and 0.1% in France. The European Central Bank’s (ECB’s) January minutes showed optimism about inflation returning to 2% but also flagged upside risks. Some policymakers favored caution on further rate cuts, while surveys suggested stable consumer inflation expectations.
Germany’s conservative CDU/CSU, led by Friedrich Merz, won the national election with 28.52% but lacked a majority. In the UK, house prices rose 0.4% in January, helped by lower borrowing costs and buyers eager to close deals before a tax hike in March. Despite these uncertainties, Europe’s markets remain broadly resilient.
Outside the U.S. and Europe, Japan’s equity markets retreated, weighed down by declines in chip- and AI-related shares. The Nikkei 225 fell 4.18%, while the broader TOPIX lost 1.99%. Investors also grew wary that escalating U.S. tariffs—including a planned additional 10% duty on Chinese imports—could hinder Japan’s economic recovery. Bank of Japan (BoJ) Governor Kazuo Ueda emphasized uncertainty around trade policy and reiterated the central bank’s readiness to act if needed. Tokyo’s core inflation at 2.2% shaped discussions. The yen weakened toward the lower end of the JPY 150 range against the U.S. dollar, while the 10-year Japanese government bond yield declined slightly.
In mainland China, equities fell following the announcement of U.S. tariffs. The CSI 300 Index lost 2.22%, and the Shanghai Composite Index dropped 1.72%. Chinese officials vowed to respond with “all necessary measures,” clearly underscoring a trade rift. The upcoming “Two Sessions” in early March may offer clues on Beijing’s economic targets and possible stimulus. Analysts anticipate a GDP growth goal of around 5% and a 4% fiscal deficit ratio, reflecting plans to bolster the slowing economy. These developments highlight the regional impact of persistent tariff tensions, as markets navigate policy shifts and evolving global growth expectations.
As global markets grapple with shifting trade policies, evolving economic indicators, and ongoing geopolitical uncertainties, maintaining flexibility and a long-term perspective will be key to navigating the path forward.
