Stock Market Week February 17: What to Expect
This piece encapsulates the key occurrences from the previous week and offers an analysis for February 17-21. It also presents my perspectives on anticipated stock market trends for the upcoming week. In addition, I offer strategic insights and recommendations tailored for investors.
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Key Points
Market Analysis: February 17-23 and the Impact of Recent Economic Data
The upcoming stock market week, February 17-23, is anticipated to be relatively uneventful. Reflecting on the previous week’s trading sessions, despite challenges like rising inflation and tariff threats, the stock market remained resilient, with indices closing near record highs. The S&P 500 Index increased by 1.13%, while the Nasdaq 100 Index saw a gain of 2.05%. The Dow Jones Industrial Average experienced a marginal rise of 0.34%, and the Russell 2000 Index declined by 0.62%.
Throughout the week, there was notable market activity, though Friday, February 14, was characterized by low volumes and stagnant indices. My earlier prediction of bearish sentiment for the week of February 10-14 proved accurate, as the decline in the small-cap index signals caution for long-term investors.
In terms of economic data, retail sales in the U.S. fell by 0.9% month-over-month in January 2025, significantly exceeding the forecasted 0.1% decrease, following a revised gain of 0.7% in December. This marks the steepest drop in retail sales since March 2023, influenced by severe weather conditions and the Los Angeles fires, which adversely impacted consumer spending. Notably, the largest declines were seen in sporting goods, hobby, musical instrument, and book stores (-4.6%), followed by motor vehicles and parts dealers (-2.8%), non-store retailers (-1.9%), and other sectors. Conversely, sales increased at gasoline stations and food services.
The U.S. Retail Sales MoM, January 2025
Excluding food services, auto dealers, and other categories, retail sales—used in GDP calculations—decreased by 0.8%, underscoring widespread softness in consumer spending. Despite this, upward revisions in December’s figures somewhat mitigate the recent weakness. In the long term, U.S. Retail Sales are projected to trend around 0.40% in 2026, and in Q1 2025, it is projected that retail sales will increase by 0.3% QoQ.
The U.S. Retail Sales QoQ, Forecast 2025
The report highlights weather and the Los Angeles fires as primary obstacles, suggesting that part of the decline might be temporary rather than indicative of a fundamental slowdown in consumer demand. Consequently, the markets may interpret this as a signal of decelerating economic momentum, potentially supporting expectations for Federal Reserve rate cuts later in the year. Nonetheless, persistent inflation may delay any interest rate increases until June. Currently, the probability that the interest rate will stay unchanged in April (the next Fed interest rate decision) is 84.1%. Moreover, the probability of an interest rate cut in September has declined to 42.6%, which implies that the market may start to price in cooling economic growth in the coming months.
Current Probability of Interest Rate Cuts
Market Outlook for February 17-21: Navigating Volatility in a Short Trading Week
As we approach the week of February 17-21, investors should brace for a trading period shortened by the Presidents Day holiday, with the U.S. stock market closed on February 17. Trading on Tuesday may open with subdued volumes and low volatility, but an uptick in market activity is expected by Wednesday, coinciding with President Trump’s scheduled address on February 18.
President Trump’s speech is highly anticipated, as it will likely shed light on his administration’s economic policies and their projected influence on market conditions. Key areas of focus for investors include:
Tariff Policies
There’s heightened interest surrounding potential new tariffs, particularly targeting China. Historically, tariffs have been catalysts for market volatility, affecting global trade dynamics.
Tax Cuts and Deregulation
Market participants are keenly awaiting details on possible extensions of the 2017 tax cuts and further deregulation of policies enacted during the Biden administration. Such measures could enhance corporate profitability and bolster investor sentiment.
Inflation and Interest Rates
The administration’s pro-growth policies may impact inflation rates. Should inflation rise, the Federal Reserve might reconsider its timeline for anticipated interest rate cuts, altering current market dynamics.
Economic Growth
The outlook for U.S. economic growth under Trump’s leadership is a critical component of market sentiment. Positive indicators could fortify market confidence, whereas lingering uncertainties might provoke cautious trading.
The release of the Federal Reserve’s minutes on February 19 will further depend on the insights provided by Trump’s address, particularly concerning tariffs and geopolitical strategies.
Additional economic indicators to watch include the Initial Jobless Claims report on Thursday, with a consensus expectation of a slight increase from 213,000 to 214,000 claims. On Friday, February 21, the announcement of U.S. existing home sales is projected to show a decline from 4.2 million to 4.13 million units.
Overall, the upcoming week may prove lackluster, with the stock market correction anticipated soon. Several factors underpin this expectation:
Finally, technical analysis of the S&P 500 Index suggests increased profit-taking upon reaching new highs, indicating limited upside potential in the coming week.
Considering these factors, investors should exercise caution and refrain from aggressive market pursuits at current levels. A prudent strategy would emphasize profit-taking and maintaining liquidity.
Earnings For The Week
Monday: Markets Closed
Tuesday: BIDU, MDT, CC, ANET, OXY, DVN, TOL, CDNS,
Wednesday: ETSY, SEDG, GRMN, CVNA, TOST,
Thursday: BABA, WMT, U, W, NICE, SHAK, TRIP, XYZ, RIVN, MELI, NU, BKNG, INOD, TXRH, AKAM
Friday: ABR, VIPS