WEEK IN PERSPECTIVE: Week ending February 20, 2025

Stocks Rise in Holiday‑Shortened Week as Tech Rebounds, Cyclicals Lead

U.S. equities finished higher in a shortened trading week, with the S&P 500 (+1.1%) and Nasdaq Composite (+1.5%) outperforming the Dow Jones Industrial Average (+0.3%). The S&P 500 closed back above its 50‑day moving average on Friday, while the Nasdaq ended a five‑week slide.

Mid‑ and small‑cap stocks joined the advance. The S&P Mid Cap 400 gained 1.2% and the Russell 2000 added 0.7%, signaling broad participation amid ongoing sector rotation. Mega‑cap technology and communication services names—recent laggards following earnings‑related weakness—saw renewed buying interest, lifting benchmarks and ETFs including Vanguard Mega Cap Growth (+1.5%) and the PHLX Semiconductor Index (+1.5%). Software stocks continued to lag, with the iShares Expanded Tech‑Software ETF down 2.4%.

Earnings and corporate guidance remained key catalysts, driving sharp moves across sectors. Cyclical groups led the market, with industrials (+1.7%), financials (+1.6%), and energy (+1.7%) posting strong gains. Defensive sectors retreated, as consumer staples (-2.3%) and health care (-0.6%) pulled back after recent outperformance.

Economic data offered a mixed read on the macro backdrop. Advance Q4 GDP slowed to 1.4%, well below the 3.0% consensus, while the Q4 Chain Deflator rose 3.6%, underscoring persistent inflation pressures. December personal income increased 0.3% and spending rose 0.4%. Both headline and core PCE inflation came in at 0.4%, keeping expectations for near‑term Fed rate cuts subdued.

Geopolitical and policy developments added volatility. Oil prices swung sharply amid escalating U.S.–Iran tensions, and a Supreme Court ruling on tariffs briefly pressured trade‑sensitive stocks. These headlines, combined with earnings‑driven moves, contributed to rapid rotations across sectors.

Despite the crosscurrents, markets showed resilience, with mega‑cap tech stabilizing, mid‑ and small‑caps participating broadly, and cyclical sectors driving gains. Defensive areas lagged as investors positioned selectively ahead of further earnings reports, inflation data, and geopolitical developments.

Week‑to‑date performance:

• Nasdaq Composite: +1.5%

• S&P Mid Cap 400: +1.2%

• S&P 500: +1.1%

• Russell 2000: +0.7%

• DJIA: +0.3%

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