NEW YORK (AP) — Wall Street stumbled on Tuesday as growing pessimism among U.S. consumers over inflation, tariffs, and economic policies sent shockwaves through the markets. The S&P 500 dipped 0.4%, extending its losing streak to four consecutive days, while the Nasdaq Composite tumbled 1%, dragged down by a sell-off in tech stocks. The Dow Jones Industrial Average, however, managed to buck the trend, climbing 157 points, or 0.3%, buoyed by gains in retail giants like Home Depot.
The market’s downward spiral began last week, fueled by a series of disappointing economic reports. On Tuesday, the Conference Board’s Consumer Confidence Index for February revealed a sharper-than-expected decline, with consumers expressing growing concerns about the short-term economic outlook. The index fell to 98.3, marking the largest monthly drop since August 2021 and signaling potential trouble ahead for the U.S. economy.
Consumer Confidence Craters: A Warning Sign?
The Conference Board’s report highlighted a broad-based increase in pessimism, cutting across income brackets and age groups. For the first time since June 2024, the Expectations Index—which measures consumers’ short-term outlook for income, business, and labor market conditions—fell below the 80-point threshold, a level historically associated with an impending recession.
Stephanie Guichard, senior economist at The Conference Board, noted a sharp increase in mentions of trade and tariffs in consumer responses, reaching levels not seen since 2019. “Comments on the current administration and its policies dominated the responses,” Guichard said, underscoring the impact of Washington’s economic policies on consumer sentiment.
The White House, however, pushed back against the narrative, arguing that the dip in consumer confidence reflects the lingering effects of the Biden administration’s policies. Officials pointed to recent announcements by Apple and rising CEO confidence as signs of future growth. But Wall Street remains wary, as consumer spending—the backbone of the U.S. economy—shows signs of strain.
Tech Stocks Take a Beating
The tech-heavy Nasdaq bore the brunt of Tuesday’s sell-off, with high-flying momentum stocks leading the decline. Nvidia, a key player in the artificial intelligence (AI) boom, fell 1%, while Tesla plummeted 8.1% following reports of a 45% drop in European EV registrations in January. The electric vehicle maker’s struggles were compounded by concerns over CEO Elon Musk’s focus on his role in the Department of Government Efficiency (DOGE), a cost-cutting initiative under the Trump administration.
Bitcoin also took a hit, sliding below $88,000 and dragging down crypto-related stocks. MicroStrategy, now rebranded as Strategy, plunged 11.6%, while crypto exchange Coinbase fell 7%. The cryptocurrency’s decline came amid broader market uncertainty, with investors flocking to safer assets like Treasury bonds.
Zoom Communications, despite reporting stronger-than-expected quarterly results, dropped 8.6% as its revenue forecast for the upcoming year fell short of analysts’ estimates. The company’s struggles highlight the challenges facing tech firms as they navigate a shifting economic landscape.
Retail Giants Shine, But Challenges Loom
On the brighter side, Home Depot surged 4.8% after delivering a stronger-than-expected profit for the latest quarter. CEO Ted Decker, however, struck a cautious tone, noting that the retailer continues to grapple with an uncertain economy and higher interest rates, which are dampening consumer spending on home improvements.
Walmart also saw gains, rising nearly 4% and helping to prop up the Dow. But even as retail giants outperform, the broader market remains under pressure. The S&P 500’s decline was driven by losses in high-momentum stocks, which have been the market’s darlings in recent years. Smaller stocks, while showing gains, had a limited impact on the overall index due to their relatively modest size.
Tariffs and Trade Tensions Weigh on Markets
Trade tensions continued to cast a shadow over the markets, with President Donald Trump reaffirming his commitment to imposing tariffs on imports from Canada and Mexico. The 30-day moratorium on tariffs is set to expire next week, raising fears of retaliatory measures from U.S. trading partners.
Peter Navarro, senior trade and manufacturing counselor to President Trump, emphasized the administration’s focus on addressing the cross-border flow of fentanyl in tariff negotiations with Canada and Mexico. “If we don’t get the kind of progress we need on people dying here in America from deadly fentanyl, then the president will do exactly what he said he would do,” Navarro said.
The uncertainty surrounding trade policies has rattled investors, with the CBOE Volatility Index (VIX)—often referred to as the market’s “fear gauge”—spiking to its highest level since January 27. The yield on the 10-year Treasury, meanwhile, fell to 4.30%, reflecting growing concerns about the economic outlook.
Nvidia Earnings: A Litmus Test for AI Boom
All eyes are now on Nvidia, which is set to report its quarterly earnings after the market closes on Wednesday. The chipmaker’s results will be closely watched for insights into the health of the AI industry, which has been a major driver of market gains in recent years.
Nvidia’s stock has been under pressure since Chinese AI startup DeepSeek announced the development of a large language model that rivals U.S. competitors without relying on high-end chips. The announcement has raised questions about the sustainability of the AI boom and the massive investments in data centers and chip infrastructure.
Jason Hunter, head of technical strategy at JPMorgan, described Nvidia’s stock as “range-bound” in the near term, suggesting that the company may struggle to regain its previous highs. “The NVDA rebound from 114.45 support stalled after filling the Jan 27 headline gap,” Hunter wrote in a note to clients.
Global Markets: A Mixed Bag
Overseas, markets were mixed as investors grappled with the fallout from U.S. trade policies and weaker-than-expected economic data. In Europe, indexes were largely flat, while Asian markets saw declines, with Japan’s Nikkei 225 dropping 1.4% after reopening from a holiday.
In Japan, shares of trading houses like Mitsubishi, Marubeni, and Sumitomo surged after Warren Buffett reaffirmed his long-term commitment to the sector. Buffett’s Berkshire Hathaway has agreed to increase its holdings in the companies, signaling confidence in their ability to weather global economic uncertainties.
Looking Ahead: A Fragile Market
As the market heads into the final days of February, the outlook remains uncertain. The combination of weak consumer confidence, rising trade tensions, and concerns over the AI boom has created a fragile environment for investors. While retail giants like Home Depot and Walmart offer a glimmer of hope, the broader market’s reliance on high-momentum tech stocks leaves it vulnerable to further declines.
The Federal Reserve’s next move on interest rates will also be a key factor to watch. Richmond Fed President Tom Barkin on Tuesday emphasized the need to keep rates “modestly restrictive” until inflation is firmly under control. “We learned in the ’70s that if you back off inflation too soon, you can allow it to reemerge,” Barkin said, underscoring the central bank’s cautious approach.
For now, investors are bracing for more volatility as they navigate a complex web of economic and geopolitical challenges. As the old adage goes, “markets hate uncertainty,” and with so many unknowns on the horizon, Wall Street’s rollercoaster ride is far from over.
Key Takeaways:
- S&P 500 down 0.4%, marking its fourth consecutive day of losses.
- Nasdaq Composite tumbles 1%, led by declines in tech stocks like Tesla and Nvidia.
- Dow Jones Industrial Average gains 157 points, buoyed by strong performances from Home Depot and Walmart.
- Consumer Confidence Index falls to 98.3, signaling growing pessimism about the economic outlook.
- Trade tensions escalate as President Trump reaffirms plans to impose tariffs on Canada and Mexico.
- Nvidia earnings on Wednesday will be a key test for the AI industry.
As the markets continue to grapple with a host of challenges, one thing is clear: the road ahead is anything but smooth. Investors will need to stay nimble and keep a close eye on economic data, corporate earnings, and policy developments in the weeks to come.