A Trio of Economic Data Doomed Stocks to Their Worst Day of 2025

The stock market experienced its worst day of 2025 on Friday, February 22, as a trio of economic data points cast a pall over investor sentiment. The S&P 500 sank 1.7% for its worst day in two months, while the Dow Jones Industrial Average dropped 748 points, or 1.7%, and the Nasdaq composite tumbled 2.2%. The market's reaction to these data points highlights the interconnected nature of economic indicators and their impact on investor decision-making.

1. U.S. Business Activity: The preliminary report from S&P Global suggested that U.S. business activity is close to stalling, with growth slowing to a 17-month low. This report indicated that activity unexpectedly shrank for U.S. services businesses, and many in the survey reported slumping optimism due to worries about Washington. This negative outlook on business activity can impact companies in the services sector, such as airlines and metals companies, which may see lower stock prices due to concerns about the potential impact of federal government policies on their business.
2. Consumer Sentiment: A separate report showed that U.S. consumers are preparing for higher inflation, in part because of potential tariffs that could raise prices for all kinds of imports. This could affect consumer-facing companies, such as retailers and consumer goods companies, which may see a slowdown in consumer spending due to higher prices and uncertainty about the economic outlook. This shift in consumer sentiment can impact the overall economy, as consumer spending accounts for two-thirds of the U.S. economy.
3. Home Sales: The report on home sales showed that sales of previously occupied homes were weaker last month than economists expected. This could impact companies in the housing and construction sectors, such as homebuilders and mortgage lenders, which may see a slowdown in demand and lower stock prices as a result. This slowdown in home sales can also have broader implications for the economy, as the housing market is a key driver of economic growth.

Collectively, these data points suggest a potential slowdown in economic growth, which could lead to a decrease in corporate earnings. This, in turn, could negatively impact the stock market's performance, particularly for companies in the sectors mentioned above. However, it's important to note that the market has been resilient in the face of repeated scares about President Trump's tariffs, a fragile peace plan for Ukraine, and the prospect that the Federal Reserve will refrain from delivering any more interest-rate cuts for an extended period.

As investors navigate the volatile market landscape, it's crucial to stay informed about economic data and their potential impact on corporate earnings and stock prices. By monitoring these data points and adjusting investment strategies accordingly, investors can better manage risk and capitalize on potential opportunities in the market.