😰 Stock Market Has Its Worst Day of the Year

Here's why... Plus, Celsius jumps 41% while Palantir and HIMS tumble. Alibaba surges 67% this month and more...

Table of Contents

TOP STORY
📉 Stock Market Has Its Worst Day of the Year After New Economic Data Raises Concerns

🎢 Another week, another rollercoaster in the markets.

📉 In contrast to last week when the S&P 500 hit record highs after a third week of gains in a row, this week the market notched its worst day of the year with the S&P 500 falling 1.7% and the Nasdaq-100 falling 2%.

📊 Here’s how the key indexes performed in the week overall:

  • S&P 500: -1.67%

  • Nasdaq 100: -1.93%

  • TSX: -2.15%

  • Bitcoin: -0.69%

🤔 So what caused the dip? And is it a short blip or does it spell trouble ahead? 🤿 Let’s dive in…

🗞️ In other news , Celsuis ($CELH) surges 42% after annoucing major acquisition, HIMS drops 22% after FDA annoucement, Alibaba ($BABA) soars 67% this month and more - get the full breakdown of the week after our top story!

😰 Consumer Sentiment, Housing, and Walmart Earnings…

Across most media coverage, 3 key reasons stood out for Friday’s dip:

1) 😥 Consumer Sentiment & Services Data

😰 First off, a couple key data points were reported which may have spooked investors. One was the consumer sentiment index from the University of Michigan - widely regarded as a key indicator of consumer confidence in the US - which fell to its lowest level since Nov 2023. According to the survey, one major reason for this was fears surrounding Trump’s tariffs.

😬 The survey also showed consumer inflation expectations for the year ahead have jumped up from 3.3% to 4.3% - the second month in a row with an unusually large increase and the largest month-over-month increase since May 2021.

💡 Interestingly, the inflation expectations only rose for Independents and Democrats, and fell for Republicans.

🎯 Another potentially concerning data point was the Purchasing Managers Index, which showed the first contraction in services activity in over 2 years. Since services make up roughly 70% of the US economy, many economists say this is a significant development.

2) 📊 Walmart Earnings

Another factor frequently mentioned was Walmart ($WMT) earnings - generally seen as a leading indicator of broader consumer spending.

📉 While Walmart’s earnings on Thursday showed a 4% growth in revenue, its forecasts told a bleaker story, with slowing profit growth projected for 2025 causing the stock to fall 10% this week.

It wasn’t all bad news for Walmart. E-commerce sales in Q4 jumped 20% (marking 10 consecutive quarters of double-digit growth) and the company recorded strong sales growth from households earning $100,000+ (with this segment making up 75% of the company’s market share gains) - but neither of these factors helped ease the concerns of the broader economy.

3) 🏡 Housing Sales Data

The final reason that was regularly cited was housing sales data, which showed home sales in January declined to 4.08 million, ~5% below analyst estimates.

All these factors together painted a somewhat concerning picture and added to fears of fewer interest rate cuts on the horizons and rough days ahead for the stock market - but what are the experts saying?

😎 Before we dive into some of the reactions to the market dip and what it might mean for the market moving forward, a quick word from this week’s sponsor Global X!

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TOP STORY CONTINUED
🤔 What Does the Dip Mean for the Market Moving Forward? And What Should You Do About It?

“It’s definitely a period where I think the best gains have been had and [it] wouldn’t surprise me to see a significant correction”

🐝 But here’s the thing - in the last 2 years of writing the Weekly Buzz, one thing has become exceptionally clear - as soon as there is any market dip, there will always be 100s of articles in the media predicting doom and gloom and an imminent crash. Even more so now that the success/failure of the markets has become more political than ever.

🤔 So as an investor how should you react? Well, as we’ve talked about here many times before - if you’re a long-term investor - not much at all. There will always be a ton of noise in the market (and especially in the media) - and while it’s always interesting to stay on top of it, if you’re investing for the long term you’ll have to weather ups, downs, and market crashes eventually, and the best thing you can do is stay the course.

📊 That said, market corrections (even small ones) can be helpful reminders of the importance of diversification. When stocks are going up and up and up, it’s easy for beginners to over-index on the most exciting stocks and sectors posting massive returns and ignore the ‘un-sexy’ ones. But taking Friday for example, the Top 20 performers in the S&P 500 were from defensive sectors like consumer staples, utilities, and healthcare - meaning investors who were well diversified were not hit nearly as hard as ones who were not.

💡 Another quick call-out - even though the S&P 500 is well diversified, even that is becoming increasingly tech-concentrated, with the top 10 positions making up over 36% of the index (the highest concentration in 30 years). If you want to see some other alternatives to consider, watch my video here!

🗓️ This upcoming week, all eyes will be on Nvidia’s earnings - set to be announced after market close on Wednesday, February 26. Stay tuned for a special edition of the Weekly Buzz on Thursday morning, where I’ll give you the breakdown!

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ALSO IN THE NEWS
🗞️ Other Key Headlines this Week

📉 Palantir Plunges 14% After Pentagon Plans Budget Cuts

  • Palantir ($PLTR) dropped 14% after the US Defense Secretary proposed an 8% reduction in annual military spending over the next five years, reallocating $50B toward other priorities like border security and drone warfare.

  • Since 45% of Palantir’s revenue comes from the US government, these budget cuts are expected to hurt Palantir (and have already hurt the stock).

  • Adding to the pressure, Palantir CEO Alex Karp filed to sell up to $1.23B in shares.

⚡️ Celcius Surges 42% After Annoucing Acquisition of Alani Nu

  • Energy drink company Celsius ($CELH) announced its largest acquisition to date, acquiring rival brand Alani Nu for $1.8B in a cash-and-stock deal.

  • Alani Nu has built a strong following, particularly among female consumers, and the acquisition is expected to help Celsius expand its dominance in the fast-growing energy drink market.

  • Investors cheered the move, sending Celsius stock up 42% this week as analysts noted the acquisition could drive long-term revenue growth.

💊 HIMS Drops 22% After FDA Says Other Weight-Loss Drugs Are No Longer in Shortage

  • Hims & Hers ($HIMS) plunged 22% after the FDA announced that weight-loss drugs like Novo Nordisk’s Wegovy and Eli Lilly’s Mounjaro are no longer in short supply.

  • HIMS had been benefiting from compounding its own versions of these drugs, but with supply normalizing, demand for HIMS’ compounded alternatives is expected to drop sharply.

  • The FDA also stated that compounders must wind down production within the next 60-90 days, adding further pressure to HIMS’ business model.

🇨🇳 Alibaba Stock is Soaring on China-AI Hopes, Up 67% this Month

  • Alibaba ($BABA) has surged 67% this month as investors bet on the company’s growing AI ambitions and improving sentiment around China’s tech sector.

  • The company posted Q4 revenue of $38.38B, up 8% year-over-year, beating analyst expectations thanks to strong cloud and AI-driven growth.

  • AI-related revenue at Alibaba has seen triple-digit growth for six consecutive quarters, positioning the company as a major player in China’s AI race.

📈 TSX Venture Releases the List of Top-Performing Companies in 2024 with Average 207% Share Price Appreciation

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