Week in Review: February 28, 2025

March 4, 2025

Recap & Commentary

Markets ended the week lower as investors digested new trade policy announcements and additional earnings reports, including from Nvidia. Interest rates fell, with the 10-Year Treasury yield declining 0.21% over the course of the week to end at 4.22%, its lowest level since early December. Other yields also moved lower with 2-, 3-, and 5-year yields all touching their lowest levels since October. The decline in yields helped propel the Bloomberg US Aggregate Bond index to its best month since July as it gained 1.7%.

President Trump announced plans to impose 25% tariffs on imports from the European Union (EU), though exactly which imports wasn’t clear as he said it will be on “cars and all of the things.” Trump also announced that 25% tariffs on imports from Mexico and Canada will take effect March 4, while an additional 10% tariff on Chinese imports will be imposed on top of the 10% tariffs that went into effect at the start of February.

The Atlanta Fed’s GDPNow forecasting model lowered its 1Q25 GDP forecast from 2.3% to -1.5%, in response to the week’s economic data. Though the model’s estimates can be volatile, and are not always ultimately accurate, the sharp decline was noteworthy and suggested underlying economic conditions may have slowed during the first two month of the year.

Despite beating consensus revenue and earnings estimates, Nvidia shares fell 9% following the release of its earnings report as investors worried that maintaining similarly strong growth in the future will be difficult.

Economic Commentary

Core PCE inflation, the Fed’s preferred inflation measure, rose 0.3% in January, and 2.6% from a year ago. Both measures met expectations. Importantly, the annual increase of 2.6% was down from December’s 2.9% pace, giving investors hope of further slowing in the months ahead.

New home sales tumbled 10.5% in January to their lowest level since October.  Similar to housing starts and existing home sales reported the prior week, new home sales were likely affected buy unseasonably cold weather during the month. The median price of a new home rose 3.7% from a year ago to $446.3K.

Pending home sales fell 4.6% in January to an all-time low, following a 4.1% decline in December.  The same weather-related factors affecting other housing data likely contributed to the decline.

Durable goods orders exceeded expectations, rising 3.1% in January. More importantly, beneath the volatile headline number, a core reading of business demand rose 0.8%, well above the expected 0.3% increase.

Similar to consumer sentiment released the prior week, consumer confidence surprised to the downside, suffering its worst monthly decline since August 2021, impacted by consumers’ views of both current and future conditions.

Initial jobless claims jumped 22K to 242K, a near three-month high. Though the series is inherently volatile, with several large companies recently announcing notable layoffs and ongoing government cuts, the increase bears watching.

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Of Note

Through Friday, 97% of S&P 500 companies had reported 4Q24 earnings. Thus far, 75% have beaten forecasted estimates. According to industry group FactSet, earnings growth for the quarter is expected to be 18.2%, the best since 4Q21.

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Market Indices   (As of 02/28/2025)

• Feb. Employment Report
• ISM Manufacturing
• ISM Services
• Initial Jobless Claims