US Stocks Fall Sharply On Friday, Highlighting Economic Uncertainties
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US stocks faced a significant decline on Friday, February 21, 2025, as investors reacted to a series of concerning economic data releases that raised fears of a slowing economy and persistent inflation.
The S&P 500 fell by 1.7%, closing at 6,013, while the Nasdaq Composite dropped 2.2% to finish at 19,524.
The Dow Jones Industrial Average experienced its largest loss of the year, plummeting 749 points or 1.7% to close at 43,428.
The sell-off was driven by several key factors.
The S&P flash US services PMI fell to 49.7 in February, dipping below the critical 50-point mark and indicating contraction in the services sector for the first time in two years.
Additionally, consumer sentiment, as measured by the University of Michigan’s index, dropped to 64.7, its lowest level since November 2023.
This decline reflected growing concerns about potential tariffs and rising inflation expectations, which increased to 4.3% for the coming year.
The market’s reaction was further exacerbated by ongoing worries regarding President Trump’s proposed tariff policies, which could impose significant tariffs on pharmaceuticals, autos, and semiconductors.
In particular, UnitedHealth Group emerged as the worst performer in the Dow, with its shares plunging 7.2% following reports of a Department of Justice investigation into its Medicare billing practices.
The overall performance for the week was notably negative; the S&P 500 declined by 1.6%, while the Dow and Nasdaq fell by 2.5% and 2.4%, respectively.
This sharp reversal came just two days after the S&P 500 had reached a record high, highlighting the market’s volatility.
In response to the economic uncertainty, investors sought safer assets, leading to a decline in bond yields as prices rose.
The CBOE Volatility Index (VIX), often referred to as the market’s fear gauge, also saw an uptick, indicating increased investor anxiety.
As the Federal Reserve continues to adopt a cautious approach regarding interest rate cuts, these economic indicators may complicate the central bank’s decision-making process in the months ahead.
Sources: Trading Economics, MarketScreener