Stock Market Week February 24: What to Expect
This piece encapsulates the key occurrences from the previous week and offers an analysis for February 24-28. It also presents my perspectives on anticipated stock market trends for the upcoming week. In addition, I provide strategic insights and recommendations tailored for investors.
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Key Points
Analyzing Last Week’s Market Trends
Before we dive into the market outlook for February 24-28, let’s take a closer look at the previous week’s events. Several companies have disclosed their results as the financial reporting season winds down. Notably, Cadence Design (CDNS) and Allegion (ALLE) stood out with earnings that exceeded expectations and offered strong projections for the upcoming quarter. However, despite promising reports from numerous firms, the stock market saw declines. The S&P 500 Index fell by 1.67% on a week-over-week basis, while the Nasdaq 100 Index and the Dow Jones Industrial Average Index dropped by 1.93% and 2.89%, respectively.
In my analysis, several factors contributed to this market downturn. Firstly, as previously noted, investor concerns about inflation are growing, threatening to slow economic growth in the coming quarters. On February 21, the University of Michigan released its updated consumer sentiment and inflation expectations data, revealing a dip in the Consumer Sentiment Index to 64.7 from January’s 71.7. Additionally, inflation expectations have surged to levels unseen since the mid-1990s, with 1-year expectations at 4.3% and 5-10-year projections at 3.5%, surpassing the anticipated 3.3%. Secondly, rumors about the new bat virus, HKU5-CoV-2, have increased investor anxiety.
HKU5-CoV-2 is similar to SARS-CoV-2, the virus responsible for COVID-19. It can bind to human ACE2 receptors, which raises concerns about its potential to infect humans. Although HKU5-CoV-2 is less efficient at infecting human cells than SARS-CoV-2, the possibility of it evolving or mutating to become more transmissible is a worry. There are no specific treatments for HKU5-CoV-2, but researchers are exploring potential options based on existing antiviral therapies.
Consumer Uncertainty Continues Rising in January-February 2025
Consumer Sentiment in a Declining Trend
From a technical standpoint, the S&P 500 Index has twice failed to break past the 6,144.5 mark. The daily chart below indicates increasing selling pressure and volume around these peak levels. On Friday, the SPX closed near the 50-day moving average at 6,013.1. Should this support level falter, the Index may drop to 5,943.9, aligning with the 100-day moving average. As I have repeatedly advised in my weekly market analyses, I think you should be careful. With inflation, geopolitical tensions, and a scarcity of uplifting news, the stock market appears to be nearing a correction phase.
Selling Pressure at SPX Index Higher-Highs Levels
Navigating the Stock Market: Key Events from February 24-28
As we approach the trading week of February 24-28, several pivotal events stand out.
Monday, February 24, is expected to be relatively calm, with continued selling pressure in the U.S. stock market. A significant focus will be on the European Core CPI data, with forecasts suggesting a decline of 0.3% month-over-month for January 2025, following a 0.4% growth in December 2024. Interestingly, Eurostat’s quarterly estimates predict a 0.4% increase in the European Core CPI. Persistent inflation could influence the ECB’s approach to interest rate cuts in the coming months.
EU Core CPI Monthly Rate & Quarterly Forecast
Germany’s GDP data for Q4 2024 are expected to be released on Tuesday. Current predictions indicate a 0.2% contraction both quarter-over-quarter and year-over-year, offering little encouragement for market optimism.
Wednesday might see heightened trading activity, with the U.S. New Home Sales report in the spotlight. Expectations are set for a decrease to 677K in January from the previous 698K figure.
Thursday, February 27, brings a series of reports, including U.S. GDP growth, Durable Goods Orders, and Initial Jobless Claims data. The GDP is projected to show a consistent growth rate of 2.3% for Q4 2024. Meanwhile, Initial Jobless Claims are expected to increase slightly from 219K to 220K.
Friday, February 28, will focus on the U.S. Core PCE Index for January, with expectations of no change.
The U.S. Core PCE Index Monthly & Quarterly Forecast
Overall, the week appears to lack strong positive catalysts, suggesting a potential for market correction. The conclusion of February often aligns with the end of the earnings season, potentially leading to increased market volatility as companies release their quarterly results.
Assessing Nvidia’s Potential Impact on the Stock Market with Q4 2025 Earnings
As Nvidia prepares to release its Q4 2025 financial results on February 26, investors are bracing for possible stock market volatility. Historically, Nvidia’s earnings announcements have triggered significant price fluctuations, with past reports causing daily stock movements of up to 20%. Known for often exceeding market expectations, Nvidia continues to be in the spotlight.
Analysts are optimistic, forecasting strong earnings with an expected EPS of $0.84 for the quarter. Should Nvidia meet or surpass these projections, it may enhance investor confidence and spark a market rally. On the flip side, failing to meet expectations could result in a sell-off.
Looking at analyst estimates, Nvidia maintains a Strong Buy rating from 62 analysts, with a target price of $175, suggesting a potential upside of over 30%. In terms of valuation, Nvidia trades at a forward P/E of 31.8x, below the peer group average of 63.72x. However, its P/Sales ratio of 30.6 is significantly higher than the industry average of 17.6x. There are no sell ratings, and only six hold ratings on Nvidia.
As of February 23, 2025, the Put-Call ratio for Nvidia (NVDA) stands at 0.85, signaling a moderately bullish sentiment among investors as they favor Call options ahead of the earnings announcement. My strategy is to hold the shares in the earnings; do not panic if the guidance comes below the consensus. The first market reactions tend to be very emotional, characterized by overbuying or overselling. If you do not have Nvidia’s share in your portfolio, do nothing before earnings.