Last Week on Wall Street – February 21st, 2025

S&P 500: -1.58% DOW: -2.49% NASDAQ: -2.45% 10-YR Yield: 4.47%

What Happened?

Last week markets continued to see moderate volatility. While indexes such as the S&P 500 touched new all-time highs and the NASDAQ approached record levels, they quickly backpedaled. Although investor optimism remained high, amidst a strong earnings season, uncertainty persisted. This was reflected in gold’s significant rally, with prices per ounce peaking at $2,942. Gold’s rise underscores its role as a safe-haven asset amid geopolitical and economic volatility. U.S data such as poor consumer sentiment, weaker manufacturing and service reads, and lackluster guidance out of Walmart has contributed to this shift in investor sentiment. The thought among many market participants is that the consumer could be slowing down more than expected which could flow through to weaker earnings on the margin.

Among consumer reports, recent news on Friday, of a potential new Coronavirus discovered in Chinese bats, sparks alarm could be in effect to market sell-offs at the end of the week.

Outside of the U.S. European equities have had a better start to the year as they have attracted the biggest inflows since the war in Ukraine began. Europe is on track for its best first quarter gain against the U.S. in the last 10 years.
Despite these risks, investors largely focused on corporate earnings, which continued to exceed expectations, but markets remain in a delicate balancing act. Investors will closely watch upcoming economic reports, including PCE data and retail sales figures, to gauge the Fed’s next move. Meanwhile, corporate outlooks for 2025 are beginning to take shape, with businesses adjusting to shifting global trade policies and consumer demand trends.

US existing home sales fall more than expected in January

Average 30-year fixed mortgage rose 13bps by the end of 2024.
Home resales increased 2% year-on-year in January.
Rising supply, increased average prices and sticky mortgage rates help contribute to a rise in distressed sales of 3% of total sales

The key takeaway – Housing sales data is closely followed by investors as a key indicator of economic health and consumer sentiment. A strong housing market often reflects financial confidence, signaling that consumers are willing to make significant investments. Conversely, a decline in home sales may suggest economic headwinds, affordability challenges, or weakened purchasing power.

The housing market’s sensitivity to interest rates is particularly important. Elevated mortgage rates can discourage potential buyers, leading to a slowdown in sales. In January 2025, existing-home sales declined by 4.9% to an annualized rate of 4.08 million units, largely due to mortgage rates hovering around 7% and a median home price of $396,900. Despite increasing housing supply, prices have continued to rise instead of following traditional economic expectations where equilibrium demand price would consequentially decrease. Analysts attribute this trend to higher construction and borrowing costs, as well as sellers’ typical behavior to bargain for higher prices in times of heightened mortgage rates.

Reports like these are invaluable to analysts and investors, providing crucial insights into economic trends and guiding future financial decisions. A deeper understanding of housing market dynamics allows stakeholders to anticipate shifts in consumer behavior and adjust their strategies accordingly.

Walmart Warns of Slower Sales Gains After A Bumper Year

In Walmart’s Mexican business, tariff talk has caused fear and some additional shopper pullback.
Bolstering ‘low prices and convenience’ as factors for shoppers, will be put to test in a market of increased tariffs.
Projecting revenue growth of 3% to 4% for 2026, less than 2025’s 5.1%.

The key takeaway – Walmart (WMT) has seen strong growth over the past year, with its stock price surging more than 63%. Many investors closely watch Walmart’s earnings reports as a barometer for overall consumer health and market trends. However, with the company recently lowering its outlook for 2026, concerns are mounting about the broader economic outlook in the near future.

As it continues to compete with industry giants like Amazon, the undisputed leader in rapid delivery, Walmart is doubling down on its core strategy: being the nation’s most affordable destination for everyday groceries and goods. Yet, with Trump’s trade policies raising the threat of tariffs and the inevitable price hikes that follow, questions arise about Walmart’s revenue growth prospects for the coming year. Should this also signal concern for the overall health of the economy?

In Walmart’s latest earnings report, CFO John Rainey reassured investors, stating, “We feel really good about our ability to navigate.” Referring to changing market conditions. This confidence in handling economic uncertainty is nothing new. During past periods of instability, such as the COVID-19 pandemic, Walmart’s stock experienced only a brief dip before stabilizing, underscoring both consumer resilience and the strength of Walmart’s business model. Even in the toughest times, people need essential goods, and Walmart remains well-positioned as the go-to marketplace to meet those needs.

Trump Is Scrambling Global Automaker’s Reliance on America

Looking to match reciprocal tariffs on trade partners. Europe has a 10% Tariff on imports compared to our 2.5% on them.
Looking to reduce US $918B Trade Deficit by implementing tariffs of 25% or higher in the coming months.
The U.S. accounted for a quarter of sales at Toyota, 29% at Hyundai and almost 40% at Honda.
Trump is giving companies time to bring production onshore before implementing regulations

The key takeaway – The automotive market has experienced significant disruptions in recent months. Stricter emission regulations in Europe, fierce competition from emerging Chinese automakers, and the looming threat of U.S. tariffs have created a challenging landscape for the industry. These pressures raise critical questions: Will automakers develop new manufacturing processes to cut costs and counter tariffs, or will a single country dominate production and dictate where your next car is built?

For years, major automakers have shifted production overseas to capitalize on lower manufacturing costs and cheaper export fees. However, with the potential for steep reciprocal tariffs under Trump’s trade policies, companies now face a pivotal decision: Should they stay or should they go? On one hand, analysts warn that higher import tariffs could drive up vehicle prices and contribute to inflation. On the other, some argue that these policies could boost U.S. production and help reduce the trade deficit.

As the saying goes, increased competition drives productivity. Automakers now find themselves in a race to gain a competitive edge, and recent earnings reports suggest that industry leaders are already adapting. Last week, both Honda and Toyota, two of the largest automotive importers to the U.S., hinted at the possibility of relocating production to America to offset rising costs.

For now, the future of global auto manufacturing remains uncertain. In the coming months and years, we will see whether evolving regulations serve as a catalyst for industry growth or a roadblock to U.S. economic expansion.