Market Monitor February 23th

Wall Street had a difficult day as investors were shaken by two main concerns: a potential new coronavirus in China and a gloomy outlook for the American consumer.

Coronavirus Fears: The South China Morning Post reported that a Chinese research team found a new coronavirus in bats, raising the risk of animal-to-human transmission, although the virus has not yet affected humans. This report contributed to a broad sell-off on Wall Street, even as vaccine makers Moderna [MRNA] and Pfizer [PFE] saw their stocks rise.

Consumer Concerns: A pessimistic forecast from Walmart [WMT] intensified worries about the financial health of the average American. Walmart’s shares fell sharply (-6%) on Thursday and an additional -2% on Friday, while Amazon’s stock [AMZN] also dropped by 3%, marking the largest decline among the “Magnificent 7” stocks. This was further underscored by economic data showing a drop in consumer confidence (from 67.8 to 64.7 points in February) and a rise in long-term inflation expectations to their highest level since 1995, with consumers anticipating a 3.5% annual inflation rate over the next five to ten years.

UnitedHealth Under Scrutiny: UnitedHealth’s stock [UNH] fell by 7% amid an investigation by the US Department of Justice into its Medicare billing practices, specifically how it registers medical diagnoses—a process critical to determining government payments. This issue adds to the company’s challenges following the tragic shooting of a top executive last year.

Positive Developments for Chinese Stocks: In contrast, Chinese companies listed on Wall Street performed well. Alibaba [BABA] reported better-than-expected quarterly results, driven by strong performance in its Cloud Intelligence division, and received a boost from improved relations between its founder, Jack Ma, and President Xi Jinping. Other Chinese tech firms such as Bilibili [BILI] , Tencent Music [TME] , and iQiyi [IQ] also saw gains. Notably, Alibaba’s stock has surged 70% on the New York exchange this year.

Market Overview

Major Index Performance (SPY, QQQ, IWM)

S&P 500 (SPY):

• Closed at 599.94 (-1.7%), showing weakness in the short term. However, the 12-month trend remains positive at +18.13%.

Nasdaq 100 (QQQ):

• Ended at 526.08 (-2.1%), also declining. Still, the long-term trend is positive, up +20.45% over the past year.

Russell 2000 (IWM):

• Dropped to 217.8 (-2.9%), experiencing a more significant decline. Its 3-month trend is down by -8.78%, but the 12-month trend remains positive at +8.96%.

Sector Performance

1-Week Performance:

• Communication Services, Materials, Information Technology, and Industrials led the declines.
• Consumer Staples and Utilities showed slight positive performance.

1-Month Performance:

• Industrials, Energy, Information Technology, and Health Care suffered losses.
• Consumer Staples and Utilities held up relatively well.

3-Month Performance:

• Real Estate, Materials, Energy, and Industrials saw the largest declines.
• Information Technology and Consumer Services were among the few sectors that showed strength.

Market Breadth Indicators

Advancing vs. Declining Stocks:

• On Feb 21, 2025, only 21.9% of stocks advanced, while 76.1% declined, signaling broad market weakness.
• The 50-day and 100-day moving averages show a declining trend, reinforcing the bearish sentiment.

Longer-term trends:

• The market has shown mixed performance over the past week and month.
• Fewer stocks are trading above key moving averages, indicating increasing bearish momentum.

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Conclusion

The US markets experienced a significant decline, particularly in small-cap stocks (Russell 2000) and technology-heavy Nasdaq 100. Market breadth remains weak, with most stocks declining. While long-term trends remain positive, short-term weakness and sector rotation indicate a risk-off sentiment in the markets.