This Week's Key Financial Catalysts

This week was marked by a volatile yet ultimately disappointing attempt by the S&P 500 to reach new highs. A combination of tepid price action, valuation concerns, growth worries, and a major earnings disappointment from Walmart played key roles in derailing the index’s upward momentum. Here’s a breakdown of the major catalysts that shaped the financial markets over the week.

New Closing High for the S&P 500

The market struggled to gain direction after the long weekend, with minimal catalysts to drive substantial movement. The February Empire State Manufacturing Survey saw a significant rebound, jumping to 5.7 from -12.6, suggesting some strength in the manufacturing sector that mirrors previous ISM results. However, the February NAHB Housing Market Index dropped to 42 from 47, reflecting continued struggles in the housing sector. The equity market largely shrugged off these data points, leading to a subdued session Tuesday.

The S&P 500 showed resilience against selling pressure, which became an upside catalyst by the close on Wednesday. One major contributor to the positive sentiment was Microsoft (MSFT), which received a boost from its announcement that it had developed its first quantum chip, Majorana 1. The strength in MSFT helped counteract losses in homebuilding stocks, which declined after Toll Brothers (TOL) reported disappointing earnings and a cautious outlook.

Energy stocks also stood out as Occidental Petroleum (OXY) and Devon Energy (DVN) posted strong gains following their earnings reports. Meanwhile, tariff concerns resurfaced, with President Trump announcing a planned 25% auto tariff set to take effect on April 2, along with potential tariffs on pharmaceuticals and semiconductors. However, investors appeared to interpret these tariffs as a negotiating tactic rather than a long-term policy shift, limiting their impact on broader markets. The FOMC minutes from the January 28-29 meeting were released, but contained no surprises, leaving monetary policy expectations unchanged.

Walmart Earnings Spark Selling Pressure

A significant turning point for the week came on Thursday when Walmart (WMT) reported disappointing fiscal Q1 and full-year guidance. The retail giant’s stock dropped 6.5%, making it the worst performer in both the Dow Jones Industrial Average and the S&P 500 consumer staples sector (-1.0%). While Walmart raised its dividend 13%, the company’s weak guidance for the quarter and year raised concerns about consumer spending trends, weighing on broader market sentiment. Adding to the pressure, weaker-than-expected economic data included an increase in weekly jobless claims and a softer Philadelphia Fed Survey for February.

Another key development was the rally in crude oil prices, which climbed above $70 per barrel. Higher energy costs could place further strain on corporate profit margins and consumer budgets, adding another layer of complexity on inflation.

Growth Concerns Carried into Friday

As the week ended, broader concerns about valuation and slowing growth took center stage. Some of the biggest winners year-to-date lost momentum, leading to renewed chatter about the market potentially hitting a near-term top. Several cyclical sectors, including industrials, consumer discretionary, materials, and energy underperformed as risk appetite waned.

One of the major headlines on Friday was UnitedHealth Group (UNH), which plunged following a Wall Street Journal report that the Department of Justice (DOJ) had launched a civil fraud investigation into its Medicare Advantage billing practices. The negative news also dragged down peers such as Humana (HUM) and CVS Health (CVS).

Adding to growth concerns, several key economic reports were disappointing on Friday:

• February S&P Global US Services PMI fell to 49.7 from 52.9 in January, marking the first contraction in 25 months—a troubling sign given the service sector’s dominance in the U.S. economy.
• The final University of Michigan Consumer Sentiment Index dropped to 64.7 from the preliminary reading of 67.8, with tariff concerns eroding consumer confidence.
• Existing home sales declined 4.9% month-over-month in January due to affordability issues stemming from high prices and mortgage rates.

Market strategists debated whether these developments signaled the beginning of a deeper correction or a temporary pause in the ongoing rally. While some analysts pointed to strong corporate earnings as a reason for optimism, others warned that stretched valuations left little room for error. Nancy Lazar, Piper Sandler’s Chief Global Economist, summarized the bottom line as “The consumer is not hitting a brick wall – this is just normal volatility with a slower growth trajectory here in 2025 vs 2024…While growth is cooling relative to last year, we are not experiencing a downturn.”

Notable Corporate Developments

• Intel (INTC) surged 16.1% on Monday amid reports that Broadcom (AVGO) and Taiwan Semi (TSM) were considering acquiring parts of its business.
• UnitedHealth (UNH) tumbled 10% premarket following news of a DOJ civil investigation.
• Apple (AAPL) introduced the iPhone 16e, a lower-cost smartphone aimed at price-sensitive markets. While the new device could boost sales, analysts raised concerns about potential cannibalization of higher-end models.
• Carvana (CVNA) posted 498% earnings increase after selling 50% more units during the quarter, but its stock tumbled due to weaker profit margins.
• MercadoLibre (MELI) broke out after reporting a 286% surge in earnings, fueled by strong e-commerce and fintech growth.
• Garmin (GRMN) soared to record highs after smashing earnings expectations and raising guidance for 2025.
• Payment stocks Shift4 (FOUR), Toast (TOST), and Block (XYZ) announced earnings this week all showing huge increases in earnings per share; however, investors sold off shares likely on the appreciation these stocks have already seen and due to lower guidance.
• Palantir Technologies?(PLTR) plunged from record highs amid reports that the Trump administration is looking to slash the defense budget.
• Alibaba (BABA) has been a real winner in 2025 so far. They beat on earnings per share and revenue estimates with cloud growth of 13%, an increase from the previous quarter’s 7% growth. The company said it plans to aggressively invest in AI.

Chart of the Week

One of my favorite technical analysis expressions is “a failed bullish pattern is bearish” and vice versa. The technical setup for the S&P 500 after this week’s failed breakout to new highs is bearish short-term – hence the follow-through weakness on Friday to Thursday’s sell off. Breakouts should be between 1-3% beyond the support or resistance level and retests need to hold. Neither took place this week. The good news is that price is already near a significant support level with both the intermediate trend and the 50-day moving average near 6000, which is also a psychological support level.?

Underneath the surface there are some concerns with the discretionary vs staples sector breakdown this week in the chart I showed last week. I’ll show that below as a follow up to last week’s chart of the week.

Conclusion: A Market Struggling for Direction

The week’s market action underscored a mix of resilience and vulnerability. While the S&P 500 initially closed at a new high Wednesday, disappointing earnings from Walmart, valuation concerns, and signs of slowing growth in services ultimately weighed on sentiment.

Looking ahead, Nvidia’s earnings on the 26th will be a key driver of tech sector performance and overall market sentiment. While Nvidia no longer holds the same untouchable status it did in 2023 and early 2024—especially following last month’s release of DeepSeek—it remains a dominant force in the AI space. Analysts continue to raise their price targets as major data center companies invest billions in its AI chips, fueling an ongoing arms race to determine the future leader in artificial intelligence.

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