"Everybody in the world is a long-term investor until the market goes down." – Mutual Fund Manager Peter Lynch
Image by Bespoke on X
American stocks extended their losses on Tuesday in what is shaping up to be a painful week in the stock market so far. A one-two punch of tariff uncertainty and recession fears has triggered a massive market sell-off in which the S&P 500 and Nasdaq Composite have both sunk to their worst performances since 2022 while the Dow Jones Industrial Average has also been tattered, falling 450 points on Tuesday alone. The S&P 500's 2.7 drop on Monday was the index's worst performance of 2025 so far.
Investors are now anxiously awaiting the results of Wednesday's Consumer Price Index (CPI) to determine which way to go next. On a positive note, inflation rates have been on the decline under the Trump administration, as prices for items like eggs and gasoline finally come down.
As the trade tensions intensify, Wall Street analysts are assessing their economic forecasts. Citigroup has been the first to cave into the pressure, going so far as to downgrade its outlook on American stocks to a "neutral" rating from "overweight," blaming the tariffs, while upgrading China's equities to "overweight." The latest labor market data showed that job openings rose in January, a welcome sign for those who may have been left unemployed in the latest wave of government job cuts.
Meanwhile, with the trade war unfolding, corporate America's profits have been left in the crosshairs. In response, JPMorgan said the chances for a U.S. economic recession in 2025 have now increased from 30% to 40%. JPMorgan analysts also expect that a relief rally is on its way in the stock market, saying chances for a rebound are greater than any immediate declines despite a slowing economy.
Famous economist Mohamed El Erian posted,
"With today's additional decline, the S&P is very close to correction territory— that is, down 10% from its recent high of just three weeks ago. The Nasdaq got there last week.
The longer this sell-off continues, the more economists will worry about 'negative wealth effects' compounding the pressure on growth from policy uncertainties."
Tech Roundup
This week in tech has been all about Tesla, which has exhibited whipsaw behavior. After sinking 15% on Monday in response to selling pressure and shaving $29 billion from Elon Musk's net worth, Tesla stock rebounded on Tuesday, gaining nearly 4%.
Wall Street analysts are mixed on Tesla stock. On the bearish side, UBS reiterated a "sell" rating and lowered their price target to $225 from $259 per share. On the bullish side, Morgan Stanley analysts reiterated their overweight rating on Tesla stock, calling the pullback in shares a "buying opportunity."
Not to be outdone, President Trump stepped in, taking aim at those he said are boycotting EV maker Tesla because of Musk. He responded by putting his money where his mouth is and buying a Tesla on the White House grounds. In response, Musk vowed to double Tesla's EV production in the U.S.
Image Courtesy of X
Markets Snapshot
Index | Tuesday Close | Point Change | Percentage Change |
S&P 500 | 5,572.07 | 🡇42.49 | 🡇0.75% |
Dow Jones Industrial Average | 41,433.48 | 🡇478.23 | 🡇1.14% |
Nasdaq | 17,436.10 | 🡇32.22 | 🡇0.18% |
Market Movers
AI stocks bucked the downward trend on Tuesday, sending shares of Nvidia, CrowdStrike and Super Micro Computer all higher. Super Micro led the way with a 10.6% gain as a top performer in the S&P 500.
Apple stock dragged on the Nasdaq Composite, sinking 2.3%.
Southwest Airlines soared by 8% on Tuesday in response to news that it would start charging passengers for bags, a reversal in policy that will generate an additional revenue stream.
Microsoft has declared a quarterly dividend of $0.83 per share, in line with its previous distribution. Fellow software stock Oracle just increased its dividend payout from $0.40 to $0.50 per share. Dividend stocks are one way to play this crazy stock market.
Defensive Dividends
The Wall Street Journal reported that investors have been sheltering their portfolios from all the market volatility by investing in dividend stocks. Many established companies will continue to make dividend payments from their profits and cash flow despite fluctuations in their share price, giving investors a way to generate income even when the stock price is falling. Here's a list of some dividend stocks cited in the report and their respective cash amounts:
Walmart: $0.235 (quarterly)
Abbott Laboratories: $0.59 (quarterly)
Nike: $0.40 (quarterly)
ExxonMobil: $0.99 (quarterly)
Papa John's International: $0.46 (quarterly)
Blue Owl Capital: $0.37 (quarterly)
Stock Market Fact
Investors are feeling more skittish than ever, with the Fear & Greed index now hovering in "Extreme Fear" territory. Many investors are wishing they were sitting on a cash hoard like Warren Buffett's of $325.2 billion. Until that day, stocks are likely to remain volatile for the foreseeable future.
Image courtesy of Blossom on X
The average bull market lasts for just under four years. Carson Group Chief Market Strategist Ryan Detrick explained that of the bull markets that make it to the third year, choppy and frustrating markets like the one unfolding now are completely normal. He published a chart illustrating the bull markets of the past 50 years that made it to their second birthday, the latest of which began in 2022.
Image by Carson Investment Research
Look Ahead
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