The stock market bled red Friday amid growing fears about the strength of the U.S. consumer. Meanwhile, a Warren Buffett appearance, Nvidia (NVDA) earnings and the Fed's favored inflation gauge all loom.
The Nasdaq composite came under attack the entire session and ended Friday down an eye-watering 2.2%. It plunged back below its 50-day moving average, a key bearish sign, and lost 2.5% for the week. The tech-heavy index's gain for the year has now shrunk to just 1.1%.
The S&P 500 pulled back to its own 50-day line after diving 1.7% for the day, which was also its loss for the week. Due to the benchmark index's relatively lower technology exposure, it remains up 2.2% so far in 2025.
Decliners eclipsed advancers around 3-to-1 on both the New York Stock Exchange and the Nasdaq. Volume was higher on both exchanges, adding a fresh distribution day to the S&P 500 and the Nasdaq.
While it was monthly options expiration day, which often adds volatility, volume ran higher than the prior session even before the market closed.
Additionally, the Direxion Nasdaq-100 Equal Weighted (QQQE) exchange traded fund dropped 1.9% while the Invesco S&P 500 Equal Weight ETF (RSP) skidded 1.4%, highlighting the broad-based nature of the rout.
Bears Body Slam Growth Stocks, Trigger Shift
The Dow Jones Industrial Average was punched by 749 points, falling 1.7% Friday. It suffered its worst day of 2025 so far and knifed below its 50-day line. UnitedHealth (UNH) was the worst performer as it fell 7.2% on a WSJ report that the Justice Department is probing its Medicare billing practices. Nvidia (NVDA) also lagged.
Small caps fell hard, with the Russell 2000 diving 2.9% Friday and closing below its 200-day line for the first time since late 2023.
Growth stocks were given the harshest beating by the bears though, with the Innovator IBD 50 (FFTY) ETF plummeting 7.4%.
Thursday's negative action intensified Friday. Leading stocks weakened considerably, small caps came under attack and the Nasdaq fell below the key 50-day line.
Because of this, Investor's Business Daily is cutting its recommended exposure level to the 40% to 60% range. Investors should pare back exposure in a measured fashion, and sell their weakest holdings first.
Consumer Fears Rock Stock Market
A downbeat outlook from retail giant Walmart on Thursday gave the bears an excuse to pounce. Worries about the health of the U.S. consumer were exacerbated Friday after the University of Michigan consumer sentiment index reading for January fell to 64.7, a decline of nearly 10 points. This was a steeper drop than expected, and was fueled by worries that tariffs could spark higher inflation.
The S&P flash U.S. services PMI reading for February and January existing-home sales also came in below forecast.
A smorgasbord of economic data looms in the week ahead, including consumer confidence numbers Tuesday as well as home sales data on Wednesday and Thursday. Durable goods orders data and a revised GDP reading for the fourth quarter also drop on Thursday.
However, the biggest focus will be Friday's release of the Personal Consumption Expenditures Price Index reading for January. This is the Federal Reserve's favored inflation gauge and plays a big role in the future path of interest rates.
Economists expect headline PCE to cool slightly to a 2.5% lift year over year, according to Econoday. They see core PCE, which strips out food and energy, at 2.6%.
Warren Buffett, Nvidia Earnings Loom
And while earnings season is slowing down, there are some key reports in the coming week.
Not least among them is the fourth-quarter report from Warren Buffett's Berkshire Hathaway (BRKB) over the weekend. The Oracle of Omaha's annual letter to shareholders and his comments during Saturday's shareholder meeting will be under close scrutiny.
Berkshire is just the appetizer though, as artificial intelligence leader Nvidia, Home Depot (HD), Salesforce (CRM) and IBD 50 name Duolingo (DUOL) are all set to report during the working week.
These Stock Market Areas Lagged Most
Nearly all of the S&P 500 sectors ended Friday's session in negative territory. Technology and consumer discretionary stocks struggled most while only consumer staples, a defensive area, squeezed out a gain.
The relative performance of IBD's 197 industry groups offered a more nuanced vantage point of the action on the stock market today.
Alternative energy plays, educational software companies, electronic consumer products stocks, airlines, and oil and gas royalty trusts were among the worst performers.
By contrast, confectioners, metal products distributors, a variety of food groups and mortgage stocks all outperformed.
China stocks did well after it emerged billionaire investor Ryan Cohen had increased his stake in e-commerce giant Alibaba (BABA) to about $1 billion.
Alibaba stock jumped nearly 6% and hit a new 52-week high. That helped Temu parent PDD (PDD) pop 5.6% while Baidu (BIDU) rose 1.8%.
View the General Market Indicators chart page here.
Please follow Michael Larkin on X at @IBD_MLarkin for more analysis of growth stocks.
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