U.S. Stocks Pull Back on Cautious Outlook and Policy Shifts

New York, February 23, 2025 - U.S. stocks fell on Thursday as investors analyzed the outlook for Walmart (WMT) and the potential impact of President Trump's planned tariffs and government policy changes. The Dow Jones Industrial Average (^DJI) declined approximately 450 points, or 1%. The S&P 500 (^GSPC) dropped 0.5%, retracing from its second consecutive record close on Wednesday, while the tech-heavy Nasdaq Composite (^IXIC) also lost about 0.5%.

Concerns escalated about headwinds confronting American businesses after Walmart exceeded quarterly earnings estimates but issued conservative guidance for fiscal year 2026. Shares of the retail giant plummeted by more than 6%. The decline in Walmart, coupled with drops of roughly 4% in Goldman Sachs (GS) and JPMorgan (JPM), weighed on the Dow.

Trump's Tariffs and Policy Disruptions

A looming challenge is Trump's tariffs, which have prompted companies like General Motors (GM) to consider significant changes to their operations. The latest in his policy overhaul is a proposed 8% reduction in Pentagon spending, which negatively affected Palantir's (PLTR) stock by approximately 5%. Markets were already awaiting Trump's subsequent moves with caution, particularly after a clash with Ukraine's president reignited geopolitical concerns. Gold (GC=F) reached a new all-time high as investors reduced their appetite for risk.

Potential Disruptions to Market Rally

Uncertainty surrounding potential policy changes by President Trump has minimally affected the 2025 stock market rally, with the S&P 500 (^GSPC) hovering just below its latest record high set on Wednesday. However, some Wall Street analysts are expressing concern that the positive news surrounding Trump's impending policies may have already been priced in, leaving more room for disappointment than an upside surprise when clarity on his future actions emerges.

CEO Confidence Jumps

Chief executives expressed their highest level of confidence in the business outlook in three years. Data released on Thursday showed that the Conference Board's measure of CEO confidence increased by nine points in the first quarter of 2025 to a reading of 60, its highest level in that time frame. The Conference Board noted that the movement above 50 reflects a shift from "cautious optimism" to "confident optimism" among business leaders.

Tough Day for Some Market Leaders

Following Wednesday's record high, risk-aversion swept the market on Thursday, with some of 2025's best performers experiencing the most significant losses. Shares of Intel (INTC), Crowdstrike (CRWD), and Palantir (PLTR) — all of which had recently rallied and were among the top 10 performers in the S&P 500 (^GSPC) for the year — declined by 3% or more. The Financials sector (XLF), one of the top-performing sectors in the S&P 500 for the year, led the decline among the 11 sectors on Thursday, falling by more than 2%. Goldman Sachs (GS), JPMorgan (JPM), and Morgan Stanley (MS) all dropped by over 4%. All three stocks had gained at least 10% this year.

Energy Stocks Lead Year-to-Date

Natural gas has contributed to the outperformance of energy stocks compared to other sectors and the broader market. On Thursday, the S&P 500 Energy ETF (XLE) had surged by more than 7% year-to-date, outperforming the broad-based index's rise of 3.5% during the same period. "The energy strength is in natural gas (boosted by cold weather), pipelines, and midstream companies," said Louis Navellier, founder and chief investment officer of Navellier & Associates.

Walmart CFO Defends Guidance

Walmart CFO John David Rainey aims to allay investor concerns that 2025 will not be as strong as recent years. "They're conflating our guidance with ... maybe suggesting that we're feeling like things aren't as good, or the economy is softer," Rainey told Yahoo Finance. "Let me be very clear: That's not the case. We feel really good about how we're doing." Shares of the retail giant plummeted by over 6% in trading on Thursday after it issued conservative 2026 fiscal year guidance, which it has done for the past two years. The company anticipates net sales to grow between 3% and 4%, aligning with the 4% annual sales growth target it established years ago.

Amazon Gains Control of 'James Bond' Franchise

Amazon's MGM Studios (AMZN) has gained creative control of the legendary "James Bond" franchise as it seeks to strengthen its position in the streaming wars. The studio will form a joint venture to acquire intellectual property rights from producers Barbara Broccoli and her stepbrother Michael Wilson, who will retain co-ownership of the franchise along with Amazon. Financial terms of the deal were not disclosed. "With my 007 career spanning nearly 60 incredible years, I am stepping back from producing the James Bond films to focus on art and charitable projects," Wilson said in a statement. "Therefore, Barbara and I agree, it is time for our trusted partner, Amazon MGM Studios, to lead James Bond into the future."

Palantir Stock Slides on Pentagon Spending Cut Concerns

Palantir's stock plummeted by over 11% amid concerns about Pentagon spending reductions. The sell-off in the software contractor's shares continued after they fell more than 10% in the previous session. The decline followed Defense Secretary Pete Hegseth's instructions to Pentagon agencies and the military to cut their budgets by 8% over the next five years. Wedbush analyst and Palantir enthusiast Dan Ives defended the tech firm's ability to weather the potential budget cuts, stating, "In our view, Palantir's unique software approach will enable the company to gain MORE ... budget dollars at the Pentagon ... not less despite these initial knee jerk reactions from the Street."

Alibaba Stock Surges on AI Momentum

Alibaba's (BABA) U.S.-listed stock jumped by 9% after the Chinese tech giant's results exceeded earnings expectations and revealed an aggressive push into AI. "Our AI momentum remains robust with AI-related product revenue sustaining triple-digit growth for the sixth consecutive quarter," Alibaba CFO Toby Xu told analysts on a call.