A look at the day ahead in U.S. and global markets from Mike Dolan
The S&P500 stock benchmark plunged into the red for the year this week as an Nvidia-led selloff, economic slowdown fears and re-ignited trade war fears jarred while the dollar surged anew.
Following Big Tech megacaps and small cap indexes into negative territory for 2025, the S&P500 plunged 1.5% on Thursday as U.S. jobless claims saw their biggest weekly jump in five months and President Donald Trump warned more tariff rises are coming as soon as next week.
Artificial intelligence darling Nvidia led the slide, tumbling 8.5% and losing $274 billion in stock market value after the chip giant’s latest earnings beat failed to impress Wall Street as its margins missed estimates.
The retreat pulled the entire Philadelphia chip index down 6% and dragged on the entire market.
As February comes to a close on Friday, futures pointed to only a modest rebound ahead of today’s bell.
Tech aside, the broader economic and trade picture is darkening.
On Thursday Trump said his proposed tariffs of 25% on Mexican and Canadian goods would take effect on March 4 along with an extra 10% duty on Chinese imports, defying expectations of those who hoped for a further delay in the levies. And he said wider ‘reciprocal’ tariffs were coming in April.
Stocks around the world tumbled 0.5% on Friday as a result.
Beijing accused the United States of exerting “tariff pressure and blackmail” by using fentanyl trafficking as an excuse for a second 10% tariff hike. Chinese stocks and the yuan fell, with Hong Kong stocks losing more than 3%.
European countries said they would retaliate proportionately, with European stocks falling back and the euro hitting two week lows ahead of another expected cut in European Central Bank interest rates next week.
Canada’s dollar fell to its lowest since February 4 and wider U.S. dollar index hit two week highs.
The risk-off moves gathered steam during the trading session, with crypto tokens among the biggest losers for the day as Bitcoin slid more than 5% to a low of $79,125.53 – its weakest level since November 11.
The combination of creeping jobless rises, in part due to ongoing government worker cuts as well as weather-related hits, and jangled consumer and business confidence is unnerving investors about what had been seen as a ‘Teflon’ economy.
And with uncertainties mounting about tariffs and government budget cuts, business planning is becoming difficult and potentially putting activity and investment spending on hold.
Fears about the wider global economic hit from a trade war are also starting to drag on domestic U.S. firms. Some 41% of S&P500 firms’ revenues are sourced overseas and 43% of all U.S. imports coming from Canada, Mexico and China.
Friday’s data diary focussed back on inflation, with the January personal consumption expenditures (PCE) inflation reading in focus as traders watch the Federal Reserve’s favored gauge closely.
But with slowdown fears now a significant concern, other readouts may start to take precedence.
Despite lingering inflation concerns, the stock market swoon and jobless flag have forced futures to nudge up bets on Fed easing further. They now see a 90% chance of another Fed cut by June and price some 60 basis points of easing by yearend.
Ten-year Treasury yields fell to new year lows of 4.22% on Friday, with two-year yields plumbing lows near 4.0% for the first time since before November’s election.
Elsewhere, ECB rate cut hopes were encouraged by the latest euro zone inflation reports for February, which showed both French and Italian annual inflation coming in below forecast and well below the central bank’s 2% target.
What’s more, euro zone consumers lowered their near-term inflation expectations last month, an ECB survey showed.
Japanese stocks followed the tech-led selloff, meantime, and lost almost 3% to hit a five-month low and the yen fell back as Tokyo inflation readings came in below forecast too – an important marker ahead of a possible Bank of Japan rate rise next month.
Key developments that should provide more direction to U.S. markets later on Friday:
* US January personal consumption expenditures (PCE) inflation gauge, personal income and spending, goods trade balance, retail/wholesale inventories, Kansas City Federal Reserve February service sector survey, Chicago Feb business survey; Canada Q4 GDP
* Chicago Fed President Austan Goolsbee speaks
* Ukraine President Volodymyr Zelenskiy meets US President Donald Trump in Washington
* US corporate earnings: AES Corp
(By Mike Dolan, editing by Ros Russell; mike.dolan@thomsonreuters.com)
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