Stock Market Update – Friday, February 28, 2025 Equities posted strong gains, reflecting increased risk appetite among investors. The S&P 500 (SPX/SPY) and Nasdaq 100 (QQQ) each advanced roughly 1.6%, while the Russell 2000 (IWM) climbed 1.1%. The Dow Jones Industrial Average (DJIA) rose 1.4%, narrowing its divergence from the tech-heavy Nasdaq. The S&P 500’s rally erased the prior session’s steep losses, restoring market confidence heading into the weekend.
The Personal Consumption Expenditures (PCE) report aligned with market expectations, alleviating inflationary pressures and bolstering investor confidence.
As market participants brace for a crucial week ahead, Friday's nonfarm payrolls report is anticipated to be a significant catalyst, particularly amidst ongoing uncertainties surrounding economic growth. Furthermore, approaching tariff deadlines are expected to introduce additional volatility into the markets. Throughout the session, equities maintained their upward trajectory, with the S&P 500 recouping more than half of its weekly losses, reflecting a resilient market sentiment.
Away From Stocks:
Commodities: WTI crude oil declined to $70 per barrel, while gold slid to $2,858, snapping an eight-week winning streak.
Cryptocurrency: Bitcoin rebounded above $84,000, reaffirming its resilience.
Treasuries: Strong demand pushed two-year yields below 4% for the first time since October, signaling shifting interest rate expectations.
Volatility: The VIX dropped below 20, reflecting reduced market uncertainty.
Are Stocks Near a Bottom?
Tariff worries and fears about growth are currently putting pressure on the markets. However, changes in monetary policy may soon create a more favorable environment for stocks, especially if expectations for interest rate cuts continue to strengthen.
Recent market fluctuations have led to a shift in sentiment indicators, indicating a possible turning point. The AAII Bullish Sentiment Index has dropped to -42%, its lowest point since September 2022, which is often seen as a contrarian buy signal. In the past, when sentiment has been this negative, the stock market has typically rebounded strongly, with average returns of +22% over the following 12 months and a 90% chance of positive performance. The Stock Market Fear & Greed Index has plunged below 20, signaling EXTREME FEAR 😱. When sentiment reaches these levels, it often means investors are panicking, selling off assets, and bracing for the worst. But history shows that extreme fear can also create major opportunities for those who stay level-headed.
Tariffs & Economic Growth: A Disinflationary Dynamic?
Contrary to widespread belief that tariffs are inflationary, hedge fund manager Steve Cohen (Point72) and several economists argue that protectionist measures may actually slow growth and suppress inflationary pressures. Recent economic data appears to support this perspective:
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The Consumer Discretionary index is crucial for tracking liquidity.