U.S. Stocks Mixed Amid Market Caution and Policymaker Focus

February 18, 2025

U.S. equity markets exhibited a mixed performance on Tuesday, influenced by market caution and attention to potential policy moves by the Federal Reserve and President Donald Trump.

The benchmark S&P 500 (^GSPC) gained nearly 0.2%, hitting a new record closing high of 6,129.58. The Dow Jones Industrial Average (^DJI) and Nasdaq Composite (^IXIC) finished marginally positive.

Investor sentiment remained cautious following Monday's Presidents' Day holiday closure, as concerns persisted regarding future interest rate movements. Federal Reserve officials reaffirmed their belief in maintaining current interest rate levels to combat rising inflation. Treasury yields ticked higher as investors sought clues about the likelihood of rate cuts this year, given recent economic data showing mixed signals.

The release of the minutes from the Fed's January meeting on Wednesday is expected to provide further insights into policymakers' perspectives amid uncertainties regarding Trump's trade policies.

Earnings and M&A Activity

Earnings season continued, with Baidu (BIDU) reporting a decline in revenue, kicking off a slew of results from China's trillion-dollar tech industry.

In terms of mergers and acquisitions, Intel (INTC) surged by approximately 16% on reports that rivals may pursue a deal that could lead to the chipmaker's split.

Social Media and Technology

Meta's (META) stock experienced a decline, threatening its 20-session winning streak on Wall Street. Nike (NKE) shares rose by more than 5% following a partnership announcement with SKIMS.

Tesla (TSLA) continued to face headwinds due to the strong U.S. dollar, impacting its revenue and earnings outlook.

Economic Indicators and Market Movers

The Commerce Department's report on Empire Manufacturing for February revealed mixed results, indicating a slowdown in overall manufacturing activity. The National Association of Home Builders' Housing Market Index also declined in February, signaling less optimism among builders due to trade concerns and rising mortgage rates.

International Markets

European stocks remained stable as the U.S. and Russia engaged in talks on ending the war in Ukraine. The pan-European Stoxx 600 (^STOXX) index edged up marginally, with defense stocks Rheinmetall (RHM.DE) and Dassault (DSY.PA) posting gains.

Inflation Concerns and Trade War Risks

Bank of America's latest fund manager survey highlighted inflation concerns, with a significant increase in the number of respondents citing a global trade war as the primary risk to markets. The escalation of trade tensions between the U.S. and other nations remains a key factor to monitor for investors.