The stock market has dropped to a near six-month low as worries about decelerating economic growth and concerns regarding tariffs have unsettled investor confidence.
Last week, the S&P 500 (^GSPC) declined almost 2.3%, while the Dow Jones fell by 3%, equating to a loss of over 1,300 points. The tech-focused Nasdaq Composite (^IXIC) experienced a decrease of about 2.4%. On Thursday, the S&P 500 officially entered correction territory, having fallen 10% from its peak on February 19.
In the coming week, attention will be centered on the Federal Reserve and the state of the US economy. The central bank is anticipated to maintain interest rates during its monetary policy announcement on Wednesday. Market participants will be looking for hints on potential future rate cuts.
Monday’s release of February retail sales is expected to be a highlight in this week’s economic data lineup. Furthermore, investors will closely monitor quarterly earnings reports from Nike (NKE), FedEx (FDX), and Micron (MU) scheduled for after the bell on Thursday.
SNP – Delayed Quote • USD
At close: March 14 at 4:57:16 PM EDT
The recent sell-off in stocks has coincided with rising market concerns regarding slowing economic data, leading investors to speculate on approximately three rate cuts from the Fed in 2025.
However, with inflation still significantly exceeding the Fed’s 2% target and potential impacts from the Trump administration’s tariffs and other policies likely to increase prices further, the Fed is expected to maintain the current interest rates on Wednesday.
A key point to watch will be the Fed’s latest Summary of Economic Projections (SEP), which includes the “dot plot” outlining policymakers’ expectations for future interest rate movements, alongside comments from Chair Jerome Powell during his press conference.
During the last dot plot release in December, the median projection was for the fed funds rate to conclude 2025 in the range of 3.75% to 4%, indicating two 25 basis point cuts this year, one fewer than market sentiment.
Michael Gapen, chief US economist at Morgan Stanley, stated that ongoing fiscal policy uncertainties would likely result in the Fed communicating “a heavy dose of patience.”
“Chair Powell will probably sound cautiously optimistic about the economy while indicating a murky outlook due to heightened policy uncertainties,” Gapen remarked.
The worst retail sales report seen in a year was among the early indicators that prompted a reassessment of the US economy’s growth forecast over the last month.
On Monday morning, investors will have another opportunity to determine if the 0.9% drop in retail sales in January marks the beginning of a trend in declining consumer spending. Economists anticipate a recovery in February, forecasting a 0.6% increase in retail sales.
“The pullback in January came after a relatively strong holiday season in November and December, which had sales figures revised even higher,” noted Wells Fargo economists led by Jay Bryson in a client note on Friday. “Thus, the January decline may reflect more about a robust end to the 2024 holiday shopping period rather than a shift in consumer spending.”
In light of the recent stock market downturn driven by growth concerns, strategists indicate that any signs of improved economic performance could act as a catalyst for market rebounds. Conversely, additional adverse developments could exacerbate stock pressures.
“The principal market risk moving forward is a significant further decline in the economic outlook,” remarked Goldman Sachs chief US equity strategist David Kostin in a note that included a decrease of their year-end S&P 500 target to 6,200 from 6,500.
The last month’s notable downturn in the market was led by heavy selling in the so-called “Magnificent Seven” tech stocks.
Notably, Nvidia (NVDA), Alphabet (GOOG, GOOGL), Amazon (AMZN), Meta (META), Apple (AAPL), and Microsoft (MSFT) have all lost around 20% from their recent 52-week highs, while Tesla (TSLA) has experienced a nearly 50% decline from its peak over the past year.
Despite this, the collective weight of these stocks still represents about 30% of the S&P 500’s market capitalization, close to the mid-30% peak observed in 2024. Recent market trends underscore their importance in determining the future direction of the overall market.
“For the market to move higher from this point, broader participation is necessary, but the Magnificent Seven need to play a role,” stated Citi US equity strategist Scott Chronert in a conversation with Yahoo Finance.
Chronert further emphasized that the “structural growth component” is still intact for this group of stocks, which have significantly contributed to the S&P 500’s earnings growth in recent years. BMO Capital Markets chief investment strategist Brian Belski concurred on the group’s pivotal role.
“It seems these tech stocks may have gotten ahead of themselves,” Belski stated in an interview with Yahoo Finance. “However, these companies remain major players that define the growth trajectory of the US stock market. They’re not going anywhere.”
Economic data: Retail sales month over month, February (+0.6% expected, -0.9% prior); retail sales excluding auto and gas month over month, February (+0.5% expected, -0.5% prior); retail sales control group month over month, February (+0.4% expected, -0.8% prior); NAHB Housing Market Index, March (42 expected, 42 prior)
Earnings: No significant earnings releases anticipated.
Economic data: Housing starts month over month, February (+0.8% expected, -9.8% prior); building permits month over month, February (-1.6% expected, -0.6% prior); import price index month over month, February (-0.1% expected, +0.3% prior)
Earnings: XPeng (XPEV)
Economic data: FOMC interest rate decision (unchanged)
Earnings: Five Below (FIVE), General Mills (GIS), Signet Jewelers (SIG), Williams-Sonoma (WSM)
Economic data: Initial jobless claims, week ending March 15 (224,000 expected, 220,000 prior); Philadelphia Business Outlook, March (10.3 expected, 18.1 prior); leading index, February (-0.2% expected, -0.3% prior), existing home sales, February (-3.4% expected, -4.9% prior)
Earnings: Academy Sports and Outdoors (ASO), Darden Restaurants (DRI), FedEx (FDX), Land’s End (LE), Lennar (LEN), Micron (MU), Nike (NKE)
Friday
Economic data: No significant economic data releases anticipated.
Earnings: Carnival Corporation (CCL), NIO (NIO)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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