Investors flee risk: Dow sees biggest drop of 2025 as inflation outlook worsens
Technology and growth stocks bore the brunt of the sell-off. Investor favorites like Nvidia and Palantir suffered sharp losses as traders flocked to traditionally defensive assets.
- Feb 22, 2025,
- Updated Feb 22, 2025 11:16 AM IST
Stocks took a sharp downturn on Friday as fresh U.S. economic data reignited investor concerns over slowing growth and persistent inflation, prompting a rush toward safer assets. The losses deepened into the close, as traders opted to reduce exposure ahead of a weekend that could bring more policy surprises from the Trump administration, which has already proposed a series of tariffs and market-moving changes since taking office a month ago.
The Dow Jones Industrial Average plunged 748.63 points, or 1.69%, closing at 43,428.02—its worst decline of the year. The S&P 500 fell 1.71% to 6,013.13, extending losses from its record high on Wednesday. The Nasdaq Composite fared the worst, dropping 2.2% to settle at 19,524.01.
A string of economic reports weighed heavily on sentiment. The University of Michigan’s consumer sentiment index declined nearly 10% to 64.7 in February, reflecting heightened inflation concerns linked to potential tariffs. The survey’s five-year inflation outlook climbed to 3.5%, the highest since 1995. Additionally, U.S. existing home sales fell more than expected to 4.08 million units, while the U.S. services purchasing managers’ index slipped into contraction territory for the month.
These factors fueled a shift toward bonds, pushing yields lower. Investor anxiety intensified after Walmart shares slid 2.5% for a second straight session following a weaker-than-expected earnings forecast, raising fresh doubts about consumer resilience.
Technology and growth stocks bore the brunt of the sell-off. Investor favorites like Nvidia and Palantir suffered sharp losses as traders flocked to traditionally defensive assets. Meanwhile, consumer staples stocks outperformed, with Procter & Gamble rising 1.8% and food giants like General Mills and Kraft Heinz gaining over 3% each.
“The top 20 performers in the S&P 500 today are all from defensive sectors: consumer staples, utilities, and healthcare,” noted Larry Tentarelli, chief technical strategist at the Blue Chip Daily Trend Report. “Investors often rotate into these so-called defensive sectors when economic growth concerns appear.”
Market expectations for Federal Reserve rate cuts have shifted in response to the economic turbulence. Futures trading now suggests a 55% chance of two to three rate cuts by December 2025, up from 44.4% the previous day. Odds for a cut as early as October also climbed to 50%, reflecting growing concerns over the macroeconomic environment.
For the week, the S&P 500 lost 1.7%, while the Dow and Nasdaq both fell 2.5%.
Stocks took a sharp downturn on Friday as fresh U.S. economic data reignited investor concerns over slowing growth and persistent inflation, prompting a rush toward safer assets. The losses deepened into the close, as traders opted to reduce exposure ahead of a weekend that could bring more policy surprises from the Trump administration, which has already proposed a series of tariffs and market-moving changes since taking office a month ago.
The Dow Jones Industrial Average plunged 748.63 points, or 1.69%, closing at 43,428.02—its worst decline of the year. The S&P 500 fell 1.71% to 6,013.13, extending losses from its record high on Wednesday. The Nasdaq Composite fared the worst, dropping 2.2% to settle at 19,524.01.
A string of economic reports weighed heavily on sentiment. The University of Michigan’s consumer sentiment index declined nearly 10% to 64.7 in February, reflecting heightened inflation concerns linked to potential tariffs. The survey’s five-year inflation outlook climbed to 3.5%, the highest since 1995. Additionally, U.S. existing home sales fell more than expected to 4.08 million units, while the U.S. services purchasing managers’ index slipped into contraction territory for the month.
These factors fueled a shift toward bonds, pushing yields lower. Investor anxiety intensified after Walmart shares slid 2.5% for a second straight session following a weaker-than-expected earnings forecast, raising fresh doubts about consumer resilience.
Technology and growth stocks bore the brunt of the sell-off. Investor favorites like Nvidia and Palantir suffered sharp losses as traders flocked to traditionally defensive assets. Meanwhile, consumer staples stocks outperformed, with Procter & Gamble rising 1.8% and food giants like General Mills and Kraft Heinz gaining over 3% each.
“The top 20 performers in the S&P 500 today are all from defensive sectors: consumer staples, utilities, and healthcare,” noted Larry Tentarelli, chief technical strategist at the Blue Chip Daily Trend Report. “Investors often rotate into these so-called defensive sectors when economic growth concerns appear.”
Market expectations for Federal Reserve rate cuts have shifted in response to the economic turbulence. Futures trading now suggests a 55% chance of two to three rate cuts by December 2025, up from 44.4% the previous day. Odds for a cut as early as October also climbed to 50%, reflecting growing concerns over the macroeconomic environment.
For the week, the S&P 500 lost 1.7%, while the Dow and Nasdaq both fell 2.5%.