The stock market lost some of its shine in February, ending lower for the month after the Trump administration’s policy priorities and weak consumer sentiment made investors uneasy about the economy.
Stocks had climbed in the aftermath of President Trump’s election win, as traders geared up for lighter regulation and tax cuts — anticipating they would add up to accelerating growth. But that rally has stalled more recently as anxiety about the inflationary impact of new tariffs began to grow. A slump in technology stocks this week also weighed on the broad market.
The S&P 500 bounced late on Friday, ending a turbulent day with a gain of 1.6 percent, but the gains weren’t enough for the index to avoid a second consecutive week of losses. The index — which had touched a record as recently as Feb. 19 — was down about 1.4 percent for the month.
The pullback was driven, in part, by renewed concerns about the inflationary effects of sweeping tariffs, which Mr. Trump has already imposed on China and has said he will broaden to Canada and Mexico next week. As recently as late 2024, investors had expected the Federal Reserve to cut interest rates several times this year, moves that would be positive for stocks and the economy, but that view has shifted quickly amid concerns that inflation will linger longer than expected. With rates set to remain elevated, worries have extended to the broader impact on the economy.
Recent economic surveys showing a sharp decline in consumer sentiment, in part because of pessimism about employment prospects, as well as expectations that prices could start to climb again, have fueled caution among investors too.
“The market had shown great enthusiasm around the election, and it was predicated on the likelihood of favorable taxation, of a lighter regulatory climate, and just general enthusiasm,” said Steve Sosnick, the chief strategist at Interactive Brokers. “The problem is, those expectations got a bit ahead of the reality.”
Here’s what else to know about the recent retreat:
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Concerns about the economic outlook have been evident in other markets too. The 10-year Treasury yield fell to about 4.22 percent on Friday, its lowest level since December. Oil prices also fell on Friday, with Brent crude down more than 1 percent to just over $73 a barrel and trading close to its lowest levels since late 2024.
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Excitement about prospects for artificial intelligence had fueled a rally in tech stocks over the past year, but investors’ expectations may have stretched too far. The chipmaker Nvidia released quarterly results on Wednesday that exceeded analysts’ expectations but still left investors wanting more. Nvidia’s stock dropped more than 7 percent this week, dragging down the tech-heavy Nasdaq.
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Also weighing on broad indexes was Tesla, which fell nearly 30 percent in February, after a more than 13 percent decline this week. This week’s losses were in part a reaction to a steep decline in Tesla’s European sales. More broadly, the company, led by Elon Musk, last month reported a sharp drop in profit for 2024. Mr. Musk’s role in the Trump administration is also giving investors pause about his priorities.
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The Nasdaq fell about 2.8 percent in February, its biggest monthly decline since last April.
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A slide in cryptocurrencies is also weighing on stocks. Bitcoin, which rose to a milestone $100,000 in December, has fallen more than 20 percent from its high last month and is trading closer to $84,000. The drop has come even though the Trump administration has ushered in a lighter regulatory approach on cryptocurrencies, and as Bitcoin has fallen so have shares of companies with exposure to it like Coinbase and MicroStrategy.
Despite the drop this week, some analysts remained bullish about the long-term outlook, noting that the S&P 500 remains near a record high — and the mood on Wall Street is far from set in stone. Investor sentiment could “change on a dime,” Mr. Sosnick said.
How long Mr. Trump’s economic policies will weigh on the stock market remains to be seen.
“It’s certainly possible that stocks experience some additional policy-driven downside risk in the near term,” said David Lefkowitz, head of equities for the Americas at UBS Global Wealth Management. “But ultimately, we don’t think the Trump administration will take measures that have long lasting negative impacts on economic growth or inflation.”
